Goldman Sachs Slashes Q4 Oil Price Forecast From $50 To $43/bbl

The bank expects a global surplus of 400,000 bpd in Q4 instead of its previous forecast of 300,000 bpd.

Goldman Sachs, which has weathered the hyperbole heralding the Algeria freeze talks by maintaining that the global glut is too serious to play politics with and will likely get worse in coming months, has lowered its forecast for the price of oil.

In a note published Tuesday, a commodity research team led by Damien Courvalin wrote, "We are lowering our (fourth quarter) forecast to $43 (per barrel) from $50 (per barrel) previously.

"Given upside surprises to (third-quarter) production and greater clarity on new project delivery into year-end, this leaves us expecting a global surplus of 400,000 (barrels per day) in (the fourth quarter) versus a 300,000 (barrels per day) draw previously."

Equally troubling, Courvalin and colleagues added that their forecast only assumes a “limited” additional increase in production by Libya and Nigeria; earlier this week, the bank warned that if the "conservative" estimates of 100,000 bpd of supply returning from those nations along with Iraq is exceeded by 500,000 bpd of additional supply, it will reduce its average 2017 price forecast for U.S. crude from the current $52.50 projection to $45 per barrel.

Courvalin’s team went on to state, "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.”

The sober-minded bankers caused Zero Hedge to remark, “While we await every new headline out of Algiers, overnight Goldman threw in the towel on its "transitory" oil market bullishness.”

As crude prices rose and fell throughout September based on what might or might not happen in Algeria, analysts have weighed in with a variety of impending price scenarios: Jim Ritterbusch, president of Ritterbusch & Associates, believes we could easily see a dip to $39 shortly, while Norway in taking the longer view believes crude won't rise to $60 until 2019.