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Petrol prices could plummet further in 2016

The price of oil could drop substantially due to oversupply, according to Goldman Sachs.

The price of oil could drop substantially due to oversupply, according to Goldman Sachs. Picture: EWN

JOHANNESBURG - There are fresh predictions that the price of oil could drop to its lowest level ever of around US$20 a barrel by next year.

Goldman Sachs has released a report in which it re-valuates its estimate of the oil price from US$57 to $45 dollars a barrel in 2016.

It says the price of oil could drop substantially due to oversupply from countries such as Saudi Arabia and the United States.

Saudi Arabia and the Organisation of the Petroleum Exporting Countries (Opec) nations have controlled the price of oil for more than three decades due to their status as the majority oil and gas producers globally.

But the United States has recently made significant headway due to new technology such as fracking and is now the joint largest producer of oil globally.

Viv Govender, a market analyst at Lehumo Capital, says the Saudis have not drastically decreased their output due to market share risks.

"The Saudis lost control of it. They did try to maintain the price by cutting back production. All they would do is give away market share to the Americans. So what they've done recently is they've said we'll maintain market share, no matter what."

Goldman's report says the world's storage facilities for oil are almost filled up.

The price of a litre of petrol dropped by 69 cents at the beginning of September.

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