US oil dives below $80 after Goldman cuts price forecast
Calgary (Oct 27) US oil prices tumbled to a 28-month low below $80 per barrel on Monday after Goldman Sachs slashed its price forecasts amid further signs of lacklustre demand and booming supply, but crude later pared some losses as the US dollar slipped.
Weaker than expected US pending home sales data at mid-morning sent the dollar index lower, pepping up dollar-denominated commodity markets across the board.
But the bounce failed to completely erase losses that came after Goldman Sachs cut its forecast for brent to $85 a barrel from $100 for the first quarter of 2015 and reduced its projection for US crude to $75 from $90, making it the most bearish bank on Wall Street.
US crude for December fell to $79.44 per barrel, its lowest level since June 2012, before paring losses to trade down 88 cents at $80.30 by 3.07pm GMT.
Brent for December fell to a low of $84.55 but also partially recovered to last trade down 75c on the day at $85.48.
"As we sold off (in early trade), pending home sales came out which misses expectations so the US dollar came off and some buyers stepped in," said Bill Baruch, senior market strategist at futures for iitrader.com in Chicago.
Baruch said the overall sentiment for crude was still bearish however, and forecast $75-$77 in US crude.
The Ifo, a key index of German business sentiment fell to its lowest level in two years on Monday, adding to concerns about weak demand and the risk Europe could slip into recession.
Meanwhile a senior Iranian oil official said the Organisation of the Petroleum Exporting Countries (Opec) was unlikely to reduce its production ceiling when it meets in November, according to Shana, Iran’s oil ministry news agency.
"Trying to pick a bottom right now seems to be a risky thing to do.... without any production cut coming up or European activity picking up, which the Ifo did not point to," said Gene McGillian, senior analyst at Tradition Energy.