Goldman Sachs downgraded its 2019 crude oil price view, but forecast a recovery from present levels in the absence of a “large” global economic slowdown and improving fundamentals along with signs of major producers trimming their production.

Last year, oil prices ended lower for the first time since 2015, after a desultory fourth quarter that saw buyers flee the market. The collapse in oil prices were entirely driven by global growth concerns and exacerbated by low trading liquidity, Goldman said in a research note dated January 6.

“The oil market is still pricing in a sharp slowdown in global growth despite our economists' forecast for resilient growth and robust late-2018 oil demand data,” the investment bank said. In the absence of a large-scale economic slowdown, Goldman said it expected prices to recover further. “Although growth uncertainty will likely require strengthening physical oil markets to drive this rally, with encouraging evidence that the OPEC cuts are starting,” the bank added.

OPEC oil supply fell in December by 460,000 barrels per day (bpd) to 32.68 million bpd, a Reuters survey found last week, led by cuts from top exporter Saudi Arabia. Goldman downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 per barrel and cut its West Texas Intermediate (WTI) price view to $55.50 per barrel from $64.50.

Brent crude futures were up 1.3 per cent at $57.77 per barrel, as of 0512 GMT, while WTI prices were at $48.72 per barrel, up 1.6 per cent. “If our macro and oil fundamental view prove correct, net speculative long positions will recover from their historically depressed levels,” Goldman said. “Spot prices will continue to recover with Brent backwardation set to return by summer as inventories eventually revert to 5-year average levels.”

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