Goldman Warns of an Oil Shortage in the 2020s as Crude Falls Again Due to Record Output

The  familiar drivers of rising global supply and declining demand due to concerns over an economic slowdown caused crude to officially enter a bear market on Friday, with two key benchmarks down by 20 percent in the space of a month and U.S. crude posting the longest losing streak in over 34 years.

Brent crude on Friday fell by 39 cents to $70.26 per barrel, but West Texas Intermediate continued its downward spiral, dropping 48 cents to $60.19 per barrel; both benchmarks have declined by around 20 percent from four year highs in early October.

Friday also represented prices for WTI falling for a 10th consecutive session, the longest losing streak for U.S. oil since mid-1984, according to Refinitiv data, and effectively wiping out its gains for all of 2018; by contrast, Brent has fallen in nine of the last 10 sessions but is still up over 4.5 percent this year.

Bernstein Energy analysts pointed out that "As OPEC [the Organization of the Petroleum Exporting Countries] exports continue to rise, inventories continue to build, which is putting downward pressure on oil prices; a slowdown in the global economy remains the key downside risk to oil."

Adding to earlier news that U.S. production hit an all-time high this week of 11.6 million barrels per day was the disclosure from Baker Hughes that American drillers added 12 rigs to oil fields across the country this week, the biggest increase since the end of May.

Once again, the U.S. sanctions against Iran proved to have no effect on trading patterns, thanks to the U.S. earlier issuing waivers to 8 countries that deal with the Islamic republic, and once-fearful analysts now convinced the loss of exports will be less severe than they anticipated.

Bloomberg noted that oil declining so sharply and so quickly "will push OPEC and its allies into a corner as they gather in a highly-anticipated meeting this weekend that could yield a signal on future production cuts."

The news agency also reminded readers that a potential agreement by OPEC to return to output cuts would mark the second production U-turn for the group in 2018, and "For Saudi Arabia - the world's biggest crude exporter - it would be the third time in recent years that the kingdom has delivered a supply surge only to quickly backtrack on it."

The formidable formula of every major oil producing country pumping full out, combined with weakening demand and the U.S. allowing some key countries to continue doing business with Iran,  seems to render any argument about a global crude tightening unconvincing - but that didn't stop Michele Della Vigna, head of EMEA Natural Resources Research at Goldman Sachs, from telling CNBC that "In the 2020's we are going to have a clear physical shortage of oil because nobody is allowed to fully invest in future oil production."

He was talking in reference to the phenomenon of global oil majors increasingly looking to invest in lower-carbon areas of the energy sector in reaction to pressure for cleaner energy.

Although the push moving forward may be for OPEC to reduce its output levels, earlier this week Russia indicated a resistance to such downshifting when that country's largest oil firm, Rosneft, was a no-show at a meeting of the energy minister designed to discuss possible cuts.