The price of oil could be stuck firmly at around $50 a barrel by 2020, a Goldman Sachs analyst told CNBC, raising new fears about the energy companies that have already started to cut costs, projects and jobs to cope with falling revenues.
Several big oil and gas companies announced this week they intend to make cutbacks to stay afloat in this sinking environment. Royal Dutch Shell expects to cut 6,500 jobs, 6,000 for Centrica, and at Chevron, a 2 percent slash to its global workforce.
These measures were introduced while Brent crude and West Texas Intermediate (WTI) crude are trading around $53 and $48 a barrel respectively as the Organization of Petroleum Exporting Countries has kept its supply high – and process low – in its battle for market dominance over U.S. shale oil.
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But Michele Della Vigna, co-head of European equity research at Goldman Sachs, told CNBC Friday that by 2020, they see oil around $50 per barrel.
"What we've learned from this reporting season is that deflation is accelerating from a cost perspective. Efficiency is improving in all the mature regions and productivity is sharply improving in almost all the shale places in the U.S."
"With all of that compounds to what we think will be a multi (year) deflationary trend in oil. If we look to the end of the decade, we see oil at $50, as this productivity continues and as costs keep coming down."