Goldman Sachs sees further weakness for oil due to the worsening of already weak fundamentals after OPEC held back from cutting production at its recent meeting.
The investment bank is standing by its prediction of $20 a barrel bottom—the breakeven cash cost for highly levered high-cost US shale producers. If oil prices fall below that level, companies will have to make output cuts in order to avert losses.
Even though global oil stock will remain below storage capacity, Goldman said the rebalancing is "far from achieved" as U.S. rig count and exploration and production guidance are "too high" to achieve the required supply decline.
OPEC is also likely to pump aggressively toward the high-end of Goldman's 32-million-barrel a day forecast as Iran resumes productions after U.S. sanctions are lifted over the next few months.
Oil storage also runs the risk of hitting constraints by next spring.
Oil prices have fallen over 50 percent in the last 18 months due to burgeoning energy supply and slowing demand.