(MENAFN- Arab Times) Goldman Sachs and Germany's Commerzbank slashed their forecasts for oil prices on Friday, citing global oversupply and worries about top energy consumer China. US investment bank Goldman, closely followed by many investors including commodities funds, said it expects oil prices to tumble further this year on rising OPEC production and resilient non-OPEC supply, which is seen outstripping demand.
"The oil market is even more oversupplied than we had expected and we forecast this surplus to persist in 2016," Goldman said in a note titled "Lower for even longer".
It said crude oil prices could fall as low as $20 a barrel, although this was not its "base case".
Joining a long list of banks cutting price projections, Goldman Sachs lowered its 2016 forecast for US crude to $45 a barrel from $57, and said it saw 2016 Brent prices at $49.50 a barrel, down from its earlier $62 forecast.
Commerzbank, a leading European commodities financier, said Brent was likely to trade at $55 by the end of this year before rising to $65 by end-2016.
The German bank forecasts Brent will average $56 a barrel in 2015 and $62 in 2016. It forecasts US crude to average $51 in 2015 and $59 in 2016.
"It will take time to get rid of the oversupply," Commerzbank senior oil analyst Carsten Fritsch told Reuters Global Oil Forum.
The downgrades helped depress oil prices by more than 2 percent on Friday, with global benchmark North Sea Brent down $1.23 at $47.66 by 1350 GMT.
US crude was down $1.35 at $44.57 a barrel.
More than 10 major international financial institutions have cut their oil price forecasts over the last month, citing weak market fundamentals and a slowdown in the Chinese economy.
Meanwhile, oil supply from the United States, Russia and other countries outside of OPEC is expected to drop sharply next year - possibly the steepest decline since the Soviet Union collapsed - because of low prices, the International Energy Agency forecast Friday.
In its latest monthly report, the IEA says non-OPEC production is expected to drop nearly half a million barrels to 57.7 million barrels a day in 2016. But a prominent investment firm questions whether even a cut that steep will shrink the glut of oil on the market enough to boost the price.
Amid booming US production and high OPEC output, the benchmark price of oil plunged from over $100 last year to about $45 this week. Global oil demand has grown, but at a slower pace, and analysts have said big production cuts are needed to balance the market.
Producers in the US, who need a higher price per barrel than OPEC countries to break even, have started to cut back. The US Energy Department estimated this week that production fell by 140,000 per day in August. The decline is expected to widen in the coming months, and production should average 400,000 barrels a day less in 2016 than in 2015.
Russian and North Sea supply is also forecast to shrink in 2016, according to the IEA. Overall, non-OPEC production should drop the most since 1992, when non-OPEC output shrank 1 million barrels after the USSR fell apart.
Low oil prices are also sparking an increase in demand, IEA said. With pump prices well below $3 a gallon in most states, gasoline demand in the US is at an eight-year high. The agency said demand in China is still growing, despite signs of economic weakness, as growing use of transportation fuels offsets lower industrial demand for crude oil. The agency forecast global oil demand would rise 1.7 million barrels a day this year, the highest in five years, and grow by another 1.4 million next year.
The IEA does not provide a forecast for oil prices. In its report earlier this week, the US Energy Department said it expects US oil to average $49 per barrel this year and $54 per barrel in 2016, about $5 below the estimated average for Brent crude, the benchmark for many international types of crude.
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