CALGARY, Alberta: US oil prices briefly tumbled to a 28-month low below $80 per barrel on Monday after Goldman Sachs slashed its price forecasts amid further signs of lackluster demand and booming supply, but crude later pared some losses as the US dollar slipped.
Weaker-than-expected U.S. pending home sales data at mid-morning sent the dollar index lower, pepping up dollar-denominated commodity markets across the board.
The sharp slide in both Brent and US crude also triggered a flurry of short-covering, as market players who had correctly bet on oil prices falling closed some of their positions.
But the bounce failed to completely erase losses that came after Goldman Sachs cut its forecast for Brent to $85 a barrel from $100 for the first quarter of 2015 and reduced its projection for US crude to $75 from $90, making it the most bearish bank on Wall Street.
US crude for December fell to $79.44 per barrel, its lowest level since June 2012, before paring losses to trade down 34 cents at $80.65 by 1649 GMT.
Brent for December fell to a low of $84.55 but also partially recovered to last trade down 73 cents on the day at $85.40 per barrel.
"The main driver today has been the Goldman Sachs report, we are obviously in a down market for Brent and WTI (West Texas Intermediate)," said Tariq Zahir, a managing member at Tyche Capital Advisors.
"However, we have technically been a bit oversold so these little rebounds can be quite violent," he added, referring to the bounce.
Other analysts also said the overall outlook for crude prices was still gloomy.
The Ifo, a key index of German business sentiment fell to its lowest level in two years on Monday, adding to concerns about weak demand and the risk Europe could slip into recession.
Meanwhile a senior Iranian oil official said the Organization of the Petroleum Exporting Countries (OPEC) was unlikely to reduce its production ceiling when it meets in November, according to Shana, Iran's Oil Ministry news agency.
"I still think we are shooting down to $75 in WTI, fundamentally it looks like we are flush with supply and no geo-political news has changed the market direction," said Phillip Streible, senior market strategist at RJO Futures in Chicago.
Oversupply has helped build up oil inventories worldwide.
In the United States, for the first time since January, crude futures look poised to flip into contango, a structure in which prompt prices are below longer-dated contracts, typically signaling a weaker market.
The 12-member OPEC cartel meets on Nov. 27 to consider adjusting its output target of 30 million barrels per day for the first half of 2015. So far only a minority of members have called for an output cut.
Saudi Arabia has previously sent signals it is comfortable with lower oil prices and willing to maintain high supply levels to compete for market share.
Kuwait's oil minister has said there is no negative effect on its development plan from lower oil prices, state news agency KUNA reported on Sunday.
Global oil supply remains high despite disruption in producers such as Iraq and Libya.
Yemen resumed exports from its main oil pipeline on Saturday, a day after an attack by tribesmen temporarily halted flows, industry sources said.
US oil price tumbles to a 28-month low
