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(Sharecast News) - Goldman Sachs has cut its forecasts for crude oil prices following a dispute between Russia and Saudi Arabia, warning that they could fall as low as $20 a barrel.

Oil prices crashed on Sunday as Saudi Arabia said it would ramp up production from next month after Russia refused to join the Organization of the Petroleum Exporting Countries' plan to cut supplies.

Goldman said in a note on Sunday that the price war "unequivocally" started this weekend "completely changes" the outlook for oil and gas markets, with low-cost producers increasing supply from their spare capacity to force higher cost producers to reduce output.

"In fact, the prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus," it said.

"This is the equivalent of a 1Q09 demand shock amid a 2Q15 OPEC production surge for a likely 1Q16 price outcome."

As a result, GS cut its second-quarter and third-quarter Brent price forecasts to $30 a barrel, "with possible dips in prices to operational stress levels and well-head cash costs near $20/bbl".

The bank said that while it can't rule out an OPEC+ deal in the coming months, this agreement was inherently imbalanced and its production cuts "economically unfounded".

"As such, we base case for now that no such deal occurs, with any response only likely at sharply lower prices anyways.

"In fact, we expect this Revenge of the New Oil Order to be swifter than its first foray given the already distressed state of the shale industry, likely reducing the likelihood of another quick policy reversal."

At 0915 GMT, Brent crude was down 25% to $36.19 a barrel and West Texas Intermediate was 27% lower at $32.52.