Price of WTI crude below $80 for first time in two years
The price of a barrel of a WTI crude oil, the U.S. benchmark grade, on Monday fell below $80 per barrel for the first time in two years, the Financial Times has reported.
The newspaper said the reason for the price fall was a decline in the Goldman Sachs forecast for the price of oil for the second quarter of 2015, which the bank sees at $80.
Quotes for WTI crude oil promptly fell by 1.6% to $79.69. Quotes had already dropped below $80 on October 16 but then quickly recovered to $83. Quotes on Brent crude on Monday also declined markedly, by $1.36 to $84.77 a barrel.
Goldman Sachs analyst Jeff Kerr wrote in the forecast that the driving force of the market is current oversupply due to the shale gas revolution in the United States.
"At the moment we can confidently say that the restructuring is complete and that production growth should slow in the United States," the forecast reads.
The increase in oil production outside the United States, including in Brazil and Azerbaijan, will also lead to an excess of oil on the market in 2015, analysts say. Goldman Sachs lowered its forecast average price of Brent crude in the first quarter of 2015 to $85 per barrel, down from $100 per barrel, and its forecast for WTI down to $75, from $90 per barrel.
The continued fall in the price of oil is bad news for Russia, which experts have said needs an oil price of more than $100 per barrel to balance its budget next year. Another knock-on effect of lower oil prices is its effects on the prices for Russian natural gas - Russia's giant gas company Gazprom indexes the price of gas in contracts with international customers to the price of Brent crude.