(Bloomberg) — Goldman Sachs Group Inc cut its oil price forecasts for 2019, citing a re-emerging surplus and resilient U.S. shale production.
Global benchmark Brent crude will average $62.50 a barrel this year, analysts including Damien Courvalin said in a Jan. 6 note, down from a previous estimate of $70. U.S. marker West Texas Intermediate will average $55.50 a barrel, down from a prior forecast of $64.50. Societe Generale also lowered 2019 price outlooks by $9 a barrel in a Jan. 7 note, with Brent now seen averaging $64.25 for the year and WTI $57.25.
A surge in OPEC production in late 2018 means the market started this year better supplied than the last, and pipeline constraints in the U.S. Permian Basin will clear up faster than expected, according to Goldman. Big projects in the works for years in Brazil and Canada will also ramp up output in 2019. Combined, those increases mean fewer high-cost marginal barrels will be needed to meet global demand growth this year, Courvalin said.
“We expect that the oil market will balance at a lower marginal cost in 2019 given higher inventory levels to start the year, the persistent beat in 2018 shale production growth amidst little observed cost inflation, weaker than previously expected demand growth expectations (even at our above consensus forecasts) and increased low-cost production capacity,” Courvalin wrote.