Goldman Sachs energy analysts have cut their near-term views on benchmark ICE Brent crude oil, but said the dip can be explained by “technical” factors and not a supply and demand imbalance that warranted a drop of more than 30% since October.

“We believe that the volatility and magnitude of the sell-off were exacerbated by technical trading factors,” Goldman Sachs said.

“Beyond that, the move was driven by trend following selling flows into a greater than seasonal year-end collapse in liquidity as uncertain fundamentals led to a dearth of corporate and discretionary investor trading. As volumes have recovered this year, so have prices.”

“Our three- and six-month Brent price forecasts are now $62.5 a barrel and $67.5 a barrel, down
from $70.0 a barrel previously but still above market forwards,” the bank said in a note to clients.

“Our 2019 average forecasts are $62.5 a barrel for Brent and $55.5 a barrel for WTI with our 2020 respective forecasts unchanged at $60.0 a barrel and $54.5 a barrel.”

As a result, the bank said it expects that spot prices will continue to recover with Brent backwardation set to return by summer “as inventories eventually revert to five-year average levels.”

However, Goldman said that WTI in the first half of 2019 will “gradually decline to $50 a barrel as low-cost US production becomes unconstrained and producers resume hedging.”