Finally, Goldman Sachs oil to $150-$200: a clear pump and dump!

Discussion in 'Commodity Futures' started by crgarcia, Jul 25, 2008.

  1. GS is usally right.
  2. Didn't they say in a year or so? Don't recall exactly, but I don't think they said next week. Summer is winding down so it's logical the greasy stuff would fall off.
  3. During 2007, just before a Fed meeting, they "advised" to dump oil, because it would NOT get to $100; and possible profits didn't justify risk.
  4. Interesting. I don't remember that but I definitely believe you. Not that long ago they added C, AIG, and many others that don't come to mind, to their "just sell list." These groups have done nothing but go up since. It's been my experience that GS is just horrible at recommendations, but aren't they all?

  5. Remember; GS said Oil will hit 150 before July 4th; hmm this year; 2008; lol:D
  6. It would certainly help if the original poster were to actually reference what GS said in their report.
    Their forecast was for 2 years.

    "A new report by Goldman Sachs analysts indicates that crude oil may rise to between US$150 and US$200 a barrel within two years, as growth in supply fails to keep pace with increased demand from developing nations.

    Arjun Murti, the leading analyst of the group, first wrote of a "super spike" in March 2005, when he said oil prices could range between $50 and $105 a barrel to the end of 2009. The price of crude traded in New York averaged $56.71 in 2005, $66.23 in 2006 and $72.36 in 2007. Oil rose to an intraday record of $120.93 [on Tuesday] on speculation demand will rise during the peak US summer driving season.

    "The possibility of $150 to $200 per barrel seems increasingly likely over the next 6 to 24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty," the Goldman analysts wrote in the report.

    A report yesterday showed US service industries expanded in April, signaling higher energy use. The Institute for Supply Management said its index of non-manufacturing businesses, which makes up almost 90% of the economy, grew for the first time since December. China is increasing refining capacity and boosting imports to meet rising demand for the Olympic Games.

    US gasoline demand typically climbs going into the summer season, when Americans take to the highways for vacations. The peak-consumption period lasts from the Memorial Day weekend in late May to Labor Day in early September. Monthly fuel sales were the highest during August in five of the last six years, according to data from the Department of Energy.

    China, the world's fastest-growing major economy, has more than doubled oil use since New York crude oil dropped to this decade's low of $16.70 a barrel on November 19, 2001. Record prices have failed to stem rising consumption in developing nations, with demand led by China, India and the Middle East.

    Price forecasts for spot US benchmark West Texas Intermediate crude oil for 2008 to 2011 were revised higher by Goldman. The 2008 price estimate was raised to $108 a barrel from $96, the 2009 forecast to $110 from $105, and 2010 to 2011 estimates are projected at $120 from $110, the analysts said, citing slowing supply growth in Mexico and Russia, and low spare production capacity in OPEC.

    [High prices are also the result of sociopolitical events around the world, in addition to pure speculation.]

    -Oil prices have increased amid a dispute between the US and Iran regarding the latter’s plan to develop nuclear energy.

    -In Nigeria, Africa's biggest oil exporter, militants have attacked oil installations and kidnapped workers since the beginning of 2006, forcing Royal Dutch Shell to halt output.

    -Venezuelan production has slumped to about 2.34 million barrels a day from almost 3 million barrels a day in 2002, since President Hugo Chavez fired almost the 20,000 workers who closed the state oil company in an attempt to overthrow the government.

    -Iraq's oil production has yet to reach levels attained before the US-led invasion of 2003 as the country struggles with sectarian fighting and attacks on its energy infrastructure.

    -Mexico's production has fallen below 3 million barrels a day since October as Petroleos Mexicanos, the state-owned oil company, failed to compensate for a 30% drop at Cantarell, its largest field, which accounts for 40% of output.

    "There are supply constraints with many producers, especially from non-OPEC [countries] struggling to find new reserves, and [Chinese] and Middle East demand keeps growing," said Victor Shum, senior principal at energy consultant Purvin & Gertz in Singapore. "The fundamentals are prompting investors to get into oil in a big way and all that points to higher prices."

    Spare production capacity of [OPEC] countries is low and the group's exports may fall because of "lackluster" supply growth and rising domestic consumption in member countries, the Goldman analysts said…

    Prices are also poised to gain as major oil-exporting countries restrict foreign investments, limiting supply growth, while demand from developing countries, or non-OECD nations is rising on economic expansion and power shortages, prompting higher demand for gasoil and fuel oil, the Goldman analysts said.

    "The core of our super-spike view has been that a lack of adequate supply growth coupled with price-insulated non-OECD demand growth" is leading to higher prices, the analysts said. That could result in a "sharp correction in oil demand," the Goldman analysts said.

    Crude oil's increase above $100 a barrel was partly because of the [dollar’s] decline against the Euro, which boosted oil prices because it made commodities cheaper for buyers outside the US and attracted investors as a hedge against inflation. Oil in New York touched $100 a barrel on January 2.

    The US currency has declined 5.4% against the Euro so far this year, and 11% last year.

    Members of OPEC, which supply about 40% of the world's oil, have said supplies are adequate and blamed speculators for pushing prices up to records. The producer group won't consider raising output before it meets in September as the market is well supplied, Qatari Oil Minister Abdullah al-Attiyah said last week.

    There's a fundamental misperception that so-called speculators are driving prices to unjustified levels, the Goldman analysts said. "Unfortunately, we do not think the energy crisis will be solved by finding and punishing the big bad speculator." [Ital. added.] Commodity investors, the Goldman analysts wrote, are "helping to solve the energy crisis" by speeding up the process for oil companies to spend more on energy projects and at the same time encourage efficiency."

    BusinessIntellignece Middle East, May 6, 2008