The price of oil plummeted to a new six year low yesterday as Goldman Sachs issued a statement warning it is likely to fall to below $40 a barrel later this year.
West Texas Intermediate closed trading last night at below $46 a barrel, whereas in London, Brent crude fell to $47.32, the lowest levels since the beginning of 2009.
These latest figures mean that the price of Oil has now fallen by an alarming 59 per cent since June 2014, where it was being traded for $115 a barrel.
These figures are even more eye watering given that in 2008, Goldman Sachs predicted the price of crude oil would reach a record breaking $200 a barrel. However, on Monday the US investment bank was forced to slash its forecast and warned that oil prices are likely to fall further still.
The US bank also warned that in order to try and curb production, current prices would need to continue to remain low and that it expects Brent, the global benchmark for oil price, to fall to $42 a barrel by April 2015.
The tumbling oil price has caused havoc throughout financial markets around the globe as oil supply outstrips demand.
In the United States, oil producers are pumping oil at its fastest rate for more than 30 years.
Despite the increasing risk of oversupply, OPEC continues to refuse to cut production, having effectively created a price war between producers in the US and Russia after allowing the price per barrel to fall without reducing output.
In a statement released to clients, analyst at Goldman Sachs said:
“To accommodate the substantial expected first half inventory build and using the storage arbitrage to the one-year ahead swap, we are revising down our 3-, 6- and 12-month price forecasts for Brent to $42, $43 and $70 respectively, from $80, $85 and $90.”
“While history would suggest that a storage blow-out would push spot prices below $35, we believe that by avoiding breaching storage capacity, the market will hover around $40, potentially dipping at times into the high $30s which we see as the likely lows of this cycle,” the bank said.