Skip to comments.Goldman (Sachs)sees oil price 'super spike' to $105 a barrel
Posted on 03/31/2005 1:56:57 PM PST by nickcarraway
NEW YORK (AFX) - Oil prices have entered the early stages of trading that could lead to a 'super spike' with the potential to move prices to $105 per barrel, enough to meaningfully reduce energy consumption, according to a Goldman Sachs analysis.
The call, which would mean a possible doubling of oil prices from their current level, sent crude back above $55 per barrel for the first time in a week. The contract for May delivery was last quoted up 2.4 percent at $55.30, having earlier touched a high of $55.55.
'The strength in oil demand and economic growth, especially in the United States and China, following a year of $40-$50 per barrel WTI oil has surprised us... The reason for this adjustment in view is that persistent high prices are improving the financial position of key oil exporting countries and could serve to keep potential revolution at bay,' said analyst Arjun Murti.
Phil Flynn, senior market analyst at Alaron.com, said $105 oil is technically possible but not likely for at least 3 years and only if a major supply disruption, such as a halt to imports from Saudi Arabia, occurred. 'The timing of the report was conducive to the rally,' Flynn said. 'It's just another reason to be long. There's no doubt we're in a new bull market for crude oil.' Hear audio interview.
John Kilduff, energy risk analyst Fimat USA, agreed that the $105 price assumes a major supply disruption in Saudi Arabia or a Venezuelan embargo on shipments to the U.S.
'I don't know how they get to that number, short of a significant supply disruption event occurring,' he said. 'It's more reflective, to be fair, of the psychology of the energy market right now that there's going to be tremendous demand growth in the late third and the fourth quarter of this year. That's going to put the producers of crude oil in an extremely challenging position in terms of meeting that demand, and that's what is being priced in right now.'
Analyst Kevin Kerr of Kerr Trading International said the Goldman call was irresponsible and 'clearly an attempt to talk up the market on nothing more than hot air. Goldman has huge speculative energy positions and they have no interest in watching it go down right now.' Goldman's previous 'spike' high for oil was $80 a barrel. The brokerage also raised spot forecasts for WTI spot oil - West Texas Intermediate spot oil, the benchmark crude that trades daily on the New York Mercantile Exchange -- to $50 for 2005 and $55 for 2006. Its previous forecasts were $41 in 2005 and $40 in 2006.
Murti also said earnings consensus for oil and gas companies ought to grow by 21 percent and 35 percent, respectively in 2005 and 2006, as those stocks stand to outperform the broader market.
The return could be 80 percent if prices hit a super spike, he said.
Murti recommends adding to positions in the oil sector 'at current prices, on a pullback, or even after rallies,' and raised 2005 and 2006 earnings estimates across the board.
So what happens when the economy dips into a depression thanks to $4.84/gallon gas prices?
GS are dem investment bankers. They want the economy to do as well over the next four years as George Soros.
Well thank goodness we had that' blood war for oil' /s
I believe this is called, "talking your book."
pump and dump
"GS are dem investment bankers. They want the economy to do as well over the next four years as George Soros."
Bingo!!! That is what I thought when I heard this on CNBC this AM. Goldman Sachs contibutes alot of money to the Rats.
The thing I can't believe is that the whole fricking stock and commodities market will believe one brokerage's house opinion with really no basis to back it up.
Now then, perhaps we can get RID of the ridiculous restraints on the creators of energy, and the confiscatory taxes on the consumer leveled at the federal and state levels. Those are additional costs NOT determined by the market, but ADDED by an entity that does nothing to create the wealth caused by the use of petroleum.
The Dems blame the Pubs for being in the pocket of Big Oil and the Pubs blame the Dems for not drilling in ANWR. So, nothing different except we all get stuck paying at the pump. Here in So Cal it's worse that anywhere else.
GS does have a good reputation, and there are tangible reasons to point to (Chinese demand booming), but that still doesn't mean that they're not motivated by political issues (helping Hill get elected in 08). These analysts are mostly guessing anyway. Did you see the earlier article today from the Telegraph about chimps doing as well picking stocks as British traders?
Hehe...my girlfriend (a leftie) is convinced we went to Iraq for oil.
Last night I asked her "where the hell's all that oil Bush got for us?? I'm sick of these gas prices!"
She couldn't come up with an answer.
I.e., plan to walk on your next vacation. If you can share a ride to work, it'll cost you the same as before.
"pump and dump"
you got that right - they are already advertising consumer contracts to lock in natural gas prices for three years.
They know that as soon as this heating season is over, it will be the last time they see these prices again for quite a few years.
It willbe nice to get back to life without Middle East hype 24/7
This is called Market Manipulation and the above demonstates it. Somebody just made some bucks from this statement.
Not sure, but I think it was World Com.
John Corzine also from GS.......he was involved in the Long Term Capital scandal that nearly brought down the US stock market.
GS prediction is best reason oil will be under $30 by year end.
For what it is worth, Goldman takes significant proprietary positions in commodities trading and in the energy business.
When that happens I'll be able to buy a nice house for real cheap.
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