Goldman Sachs Cuts Year-End Oil Price Target to $43/bbl (USO) (OIL)

Crude prices are down 2.4% to $44.85/bbl Tuesday as hopes faded that OPEC producers will reach an agreement on cutting production at the informal OPEC meeting in Algiers. In addition, a cautious note on oil prices from analysts at Goldman Sachs is adding to pressure.

The firm sees a weaker than expected 4Q16 oil supply-demand balance given upside surprises to 3Q production and greater clarity on new project delivery into year-end The firm now expects a global surplus of 400 kb/d in 4Q16 versus a 300 kb/d draw previously.

As a result, the firm is lowering their 4Q16 forecast to $43/bbl from $50/bbl previously.

"While a potential deal could support prices in the short term, we find that the potential for less disruptions and still relatively high net long speculative positioning leave risks skewed to the downside into year-end. Importantly, given the uncertainty on forward supply-demand balances, we reiterate our view that oil prices need to reflect near-term fundamentals – which are weaker – with a lower emphasis on the more uncertain longer-term fundamentals," analyst Damien Courvalin said.

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