Oil price hits six-year low as Goldman forecasts $42 barrel

The UK oil industry is increasing pressure on the Chancellor to cut taxes on the North Sea oil industry in the March Budget

The shale gas boom has helped to halve the price of oil since the summer (Getty) (Getty)

Oil sank by more than 5 per cent yesterday with the price of benchmark Brent crude closing below $50 for the first time in nearly six years as it settled at $47.43 a barrel.

The fresh declines came as analysts at Goldman Sachs predicted the price for the primary fuel for the world’s economy could fall to only $42 over the first half of the year as Opec seeks to drive out the competition from the shale gas sector.

Goldman said the cartel was maintaining production levels to ratchet up the financial pressure on shale producers. America’s shale boom has helped to halve the global oil price since the summer. Shale investment has declined in recent months but Goldman said it would take some time for overall supply to fall and thus support prices.

“To keep all capital side-lined and curtail investment in shale until the market has rebalanced, we believe prices need to stay lower for longer,” the analysts said, halving their previous $80-a-barrel forecast.

The US oil benchmark, West Texas Intermediate (WTI), also fell $2.29 yesterday to settle at $46.07. Goldman predicted that WTI would head to $41 in the coming months.

The UK oil industry is increasing pressure on the Chancellor to cut taxes on the North Sea oil industry in the March Budget, claiming that thousands of jobs and billions of pounds of investment are at stake without assistance.

Amrita Sen, chief oil analyst at Energy Aspects told the BBC yesterday that more than 15 per cent of North Sea production is uneconomical at today’s prices.

However, some analysts stressed yesterday that the plummeting energy price would be a net benefit to global growth. “Historically, oil price collapses coincided with a weakening economy. This time it’s different and the market has to learn that,” said Jochen Rothenbacher, of Equinet Bank in Frankfurt.

The supermarket operator Asda announced another 2p cut in the price of a litre of fuel yesterday, saying that, from today, no customers would pay more than 103.7p a litre on unleaded petrol or 110.7p on diesel. A Birmingham petrol station was selling fuel at 99.7p a litre at the weekend.

“We have been expecting to see the price of petrol come down to £1 per litre, or lower, for some time thanks to the decline in global oil price and retailers willing to make cuts at the pump on an almost weekly basis,” said Simon Williams of the RAC.

Lufthansa said it expected its fuel bill to fall by 13 per cent in 2015 because of lower oil prices, which would boost profits. That announcement helped to lift the German airline’s share by as much as 3.6 per cent at one stage.

Goldman’s energy analysts have made some poor calls on the oil price in the past.

In the spring of 2008 they forecast that prices could rise from $123 to as much as $200 a barrel within two years thanks to strong demand from booming emerging market economies. In fact, the oil price collapsed shortly afterwards, as the global financial crisis took hold, bottoming out at $45 later that year.