Oil weakens as Goldman Sachs cuts price forecast

NEW YORK — Crude futures fell 2% or more on Friday after influential Wall Street trader Goldman Sachs cut its outlook on oil, but positive sentiment from rebounding US stock prices and less drilling for oil helped the market pare losses.

Goldman lowered its 2016 forecast for US crude to $ 45 a barrel from $ 57 previously, and Brent to $ 49.50 from $ 62, citing oversupply and concerns over China’s economy. “The oil market is even more oversupplied than we had expected and we forecast this surplus to persist in 2016,” Goldman said in a note entitled “Lower for even longer.”

Germany’s Commerzbank also cut its oil outlook, joining a long list of banks that have downgraded crude price projections on supply glut concerns.

Citing “operational stress” as a growing downside risk, the Wall Street firm said crude could even fall to near $20 a barrel. “While not our base case, the potential for oil prices to fall to such levels… is becoming greater as storage continues to fill.”

Global benchmarks for crude oil fell more than 3% initially on the Goldman announcement, then pared losses as stocks on Wall Street rebounded and news of a lower US oil rig count emerged. But toward the closing of trades, they headed lower again before finishing off their lows.

US crude settled down $1.29, or 2.8%, at $44.63 a barrel.

Brent, the global benchmark for oil, closed down 75 cents, or 1.5%, at $48.14.

US stocks were off their lows in afternoon trade ahead of a Federal Reserve meeting this week that could decide on an interest rate hike. Equity markets have given direction to oil since the end of August as investors grappled with mixed fundamentals for crude.

Oil services firm Baker Hughes said US drillers idled 10 rigs this week, cutting activity for a second week in a row in a sign that price declines were discouraging producers.

Crude prices have more than halved over the past year, with Brent tumbling from nearly $120 a barrel in the middle of 2014 to below $43 last month. Prices collapsed as a global glut of crude pushed commercial and government inventories to all-time highs.

Analysts say the market is rebalancing, but high stocks will keep weighing on prices into next year. Investors shrugged off a report of International Energy Agency that suggested that the Organization of the Petroleum Exporting Countries was successfully defending market share by keeping output steady in the face of lower prices. —