Prices close below $46 for the first time in nearly six years
Crude oil futures plunged on Monday, 12 January 2015 with the U.S. benchmark trading below the $46-a-barrel threshold for the first time in nearly six years after Goldman Sachs cut its crude outlook, predicting prices will remain low for a lengthy period.
West Texas Intermediate crude oil for February delivery fell $2.29, or 4.7%, to close at $46.07 a barrel after trading as low as $45.90. The close was the lowest since April 2009. The move followed a 0.9% loss during Friday's regular session on the New York Mercantile Exchange. WTI futures are down more than 57% from a June 2014 high of $107.26 a barrel.
Monday's drop follows some sharp cuts by Goldman Sachs to its oil-price projections. The bank's energy analysts revised down their three-month forecast for WTI crude to $41 a barrel from a previous estimate of $70. They see WTI at $39 a barrel in six months and $65 a barrel in a year, versus previous price forecasts of $75 and $80, respectively. They see Brent at $42 in three months, $43 in six months and $70 in 12 months versus previous estimates of $80, $86 and $90, respectively.
In addition to Goldman Sachs, Société Générale also cut its oil price forecast for Brent crude by $15 to average $55 a barrel in 2015. For Nymex WTI crude, the investment bank dropped its price target by $14 to $51 a barrel, citing a buildup in oil storage and inventories in the first half of this year.
In overnight news, the Organization for Economic Cooperation and Development reported economic growth in the coming months is likely to be stable in the U.S. and Canada, to slow in Germany, Italy Russia and the U.K., and to increase in China and India.
In another worrisome development on the deflation watch, copper prices fell to a 4.5-year low overnight. Recent weaker economic data coming out of major copper consumer China, and the plunging price of crude oil, have sunk the major industrial red metal.
The next major data point coming into focus for traders and investors is the 22 January 2015 meeting of the European Central Bank. Recent downbeat European Union economic data, the specter of price deflation and rhetoric coming from ECB officials suggest the central bank will soon initiate monetary stimulus in the forming of quantitative easing.
Among other energy products, February gasoline gave up 4.87 cents, or 3.7%, to close at $1.2745 a gallon, while February heating oil dropped 4.89 cents, or 2.9%, to $1.6541 a gallon.
February natural gas plunged more than 15 cents, or 5.1%, to $2.7950 per million British thermal units, its lowest close since September 2012.
