The price of oil started the first full week of 2015 the way it ended the previous year: heading downwards with analysts from two different investment banks weighing on the commodity by cutting yearly forecasts. U.S. crude (New York Mercantile Exchange: @CL.1) fell about $2 to $50.64, after sliding to a session low of $50.40 a barrel, its weakest price since April 30, 2009, while Brent crude (Intercontinental Exchange Europe: @LCO.1) for February delivery was trading at $53.41 a barrel, losing $2.77. Both benchmarks hit fresh 5Â½-year lows on Monday. A surplus of global supplies was at the forefront of many traders' minds, with many returning from a two-week festive break on Monday.
Reuters reported new Russian data and comments from an Iranian official that further highlighted the current glut in the markets. However, it was an analyst note from Citi that set the tone for the week, signaling "trouble ahead in 2015." "Three massive factors have come to a head as 2015 opens: the U.S. shale revolution, the Saudi refusal to cede market share to other producers and a weak world economy," a team, led by Edward Morse, said in the note released on Monday morning. Citi predicts the price of Brent would average around $63 a barrel in 2015, a downgrade from a previous target of $80. For 2016, it has cut its forecast to $70 a barrel from $85 a barrel. For WTI, Citi also slashed its forecast from $72 to $55 for next year and from $75 to $62 for the year after. Meanwhile, Bernstein Research also indicated new forecasts on Monday morning, stating that oil could drop to $50 per barrel before bottoming out. Its new projection for 2015 is for Brent to average at $80 a barrel, rather than the previous estimate of $100 a barrel. It's estimate for 2016 was also slashed. The dramatic fall in the price of oil - which has tanked around 50 percent since mid-June - has been due to weak demand, a strong dollar and booming U.S. oil production, according to the International Energy Agency (IEA) . Citi believe that a surge in Canadian sour crude in the first quarter of 2015 lies ahead. Allied with Saudi Arabia's efforts to regain U.S. market share and weak global demand, Citi add that it expects "volatility and turmoil" in the oil markets. "Most worrisome are unintended consequences and geopolitical fallout," Morse said in Monday's note. A drop in oil revenues for countries like Iran and Russia could mean more geopolitical tensions, according to Morse, who said that it could strain further if prices are seen as being manipulated against them.