Oil prices fell by more than a dollar on Monday to near their lowest levels since 2009 after Morgan Stanley cut its price forecast for Brent, saying oversupply will likely peak next year with Opec deciding not to cut output.
“Without Opec intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015,” Morgan Stanley said in a report.
Brent crude for January delivery dropped to a low of $67.73 a barrel, near last week’s trough of $67.53 which was its weakest since October 2009. It was down 97 cents at $68.10 by 0051 GMT.
Morgan Stanley slashed its 2015 base case forecast for Brent to $70 from $98 and for 2016 to $88 from $102. In its bear-case scenario, the bank sees the crude benchmark falling to a low of $43 in the second quarter of next year.
Top oil exporter Saudi Arabia blocked calls from poorer members of the Organization of the Petroleum Exporting Countries to reduce production at the group’s meeting on Nov. 27, fueling a further slide in oil prices which have lost more than 40 per cent since June.
“With Opec on the sidelines, oil prices face their greatest threat since 2009, but we expect a volatile 2015 rather than a one-way trade,” Morgan Stanley said in a report.
US crude fell 96 cents to $64.88 a barrel, after hitting a session low of $64.63. West Texas Intermediate crude dropped to $63.72 last week, its lowest since July 2009.
Last week, Saudi Arabia cut its monthly prices for crude it sells to the United States and Asia, a move that analysts say show it is stepping up its battle for market share.
Investors are also eyeing trade data from China during the day with further evidence of economic weakness in the world’s No. 2 oil consumer likely to pile more pressure on prices.
Reflecting lacklustre domestic demand, China’s import growth probably eased to 3.8 per cent in November from a year earlier, after a 4.6 per cent expansion in October, according to a Reuters poll of economists. Export growth likely cooled to 8.1 per cent from 11.6 per cent in October.