The global oil glut is bigger than expected and could see oil prices for West Texas Intermediate (WTI) fall to $20 a barrel, according to the US-based investment bank Goldman Sachs.

“The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016,” it said in a report released on 11 September. “We continue to view US shale as the likely near-term source of supply adjustment.”

In the report the investment bank cut its forecasts for WTI through 2016.

In Goldman Sachs’ base-case scenario, it has reduced its estimate for WTI in 2016 to $45 a barrel, down from a prediction of $57 a barrel, which was released in May.

Factors taken into account in the new estimate include expected Opec production growth, resilient non-Opec production and slowing demand from Asia.

“We now believe the market requires non-Opec production to shift from our prior expectation of modest growth to large declines in 2016,” Goldman said in its report. “The uncertainty on how and where that adjustment will take place has increased.”

Thanks to lower oil production costs Middle East producers are more likely to remain profitable amid low oil prices.

Saudi Arabia’s average oil production costs are estimated to be less than $10 a barrel, while US shale oil producers are estimated to be about $55.

Since June last year, Opec, led by Saudi Arabia, has resisted pressure to reduce production, prioritising increased market share over increased profit margins.