Goldman Analyst Expecting 'Swift and Violent Rebound' in Crude Oil Prices

A commodities analyst at Goldman Sachs is expecting a "swift and violent rebound" in energy prices during the first half of this year, with prices expected to rise to $65 a barrel (see Bloomberg article). The analyst also believes that the strategy of using supertankers to store crude oil to take advantage of the contango trade (see previous post) is “near the end of this process,” believing that the contango will likely flatten as OPEC and other producers cut supply, decreasing the availability of cheaper crude oil for immediate delivery.

OPEC in particular is beginning another round of cutbacks, with cuts expected to fall somewhere between 3-4.2 million barrels a day, to help to meet a goal of reducing production to under 25 million barrels a day. If OPEC is able to continue with planned cuts, current crude oil and gasoline prices should find a bottom and show some strength. Whether the move is sustained after any "violent" snap back will certainly depend on the health of the US economy later this year - in particular how the economy responds to the proposed stimulus plan, as well as how both inflation and the dollar react to additional borrow and spending/taxes. Given the size of the proposed stimulus plan, along with previous TARP spending, both inflation and a weaker dollar seem poised to help support higher crude oil prices over the next year.

Comments

[john s. gordon:]

does goldman have any credibility regarding oil price forecasts?
> jack

Jan 20 08:32 AM

[ROLEX18K:]

Why Goldman Sachs that loses billions have any weight in what they say, this Goldman analyst has his job at stake as he bought Crude Oil at 100$ and because being right before was allowed by his boss to keep a bleeding position, now he is under pressure to go out, he will not wait till 65$, another few bucks up and he is going to sell all thieir Crude Oil trading book.Why you always need some analyst, where are your own brains?

Jan 20 09:10 AM

[scfranklin94:]

If you really think that the stimulus plan will lift the US out of recession by June, you might be right. On the other hand if you think that deleveraging has at least 18 months to go before the US financial system is on more stable footing, as I do, then there's no way crude goes up in the short term without new massive cuts from OPEC. If OPEC does implement a new round of severe cuts that pushes crude back to $65, it will be short-lived because it will just send the world economy into a slightly deeper recession and that will reduce demand further.

I don't see long-term crude prices getting to $60 and staying there until the US economy recovers, which is most likely in 2010 at the earliest.

Jan 20 09:19 AM

[Gravity404:]

This is actually a down grade because last I checked GS had a price target of $200 on oil.

Jan 20 09:24 AM

[calisdad:]

NEWSFLASH--- Oil analyst puts Goldmans price target at $5 a share!
Cites complete lack of credibility and lack of other peoples money to play with.

Jan 20 10:02 AM

[patio:]

You lost me at Goldman analyst...

Jan 20 10:02 AM

[Perry1961:]

The same analyst predicts $20 oil before it rallies to $65. Why no mention of that in the article?

Jan 20 10:40 AM

[Ferdinand E...:]

OPEC would have to be asleep at the switch to allow oil to go to $20/b, but oil will hardly reach 65 this year, and OPEC would be making a mistake if that is their target at the present time.

Jan 20 11:00 AM

[William B.:]

Goldman Analyst called for $200 oil on the same day inventory report showed inventory build. Market listened to Goldman instead of inventory and oil was up that day. Oil market continues to build inventory and drops like a stone. Goldman losses billions on commodities. STOP on reporting the Goldman bull. He is just a mouthpiece to rally the billions on the line for Goldman Sachs.

Jan 20 01:52 PM

[Storm Cat:]

"Goldman losses billions on commodities"

You really should do some research before you write stuff like this. Look at their earnings, they MAKE billions trading commodities and have the last few years. I listened to the Goldman analyst call. They are looking for prices to decline to $30 and possibly recover at yr end or early next year. Their oil recovery scenario is based on the economy improving.

I'm not a huge Goldman fan. But I don't like when people distort things

Jan 20 03:01 PM

[Crossland:]

Another self-serving “analyst” offers up some half-baked report in a lame attempt to boost prices in the short term, hoping to emulate what’s-his-name from Morgan Stanley, who sent prices soaring in June on speculation of a US$150-barrel by July 4.

These guys are mere speculators who do not really “expect” a price rebound but, rather, are PRAYING for one to boost their pathetic bottom line. The financial collapse has completely discredited these morons. The big reason for the cataclysm is that the major players have been revealed for what they are: crooked, corrupt and INCOMPETENT

Idiots!!

Jan 20 03:31 PM

[Storm Cat:]

Dave Enke (the author above) can't even read correctly. The bloomberg article to which he refers quotes Goldman as expecting a rebound "in the SECOND half of the year" not 1H09 as Enke states.

The energy articles on this site appear to be written by individuals with very little energy expeience.

Jan 20 04:51 PM

[raytayzmd:]

...hey, give Dave a break...after all, he is a college professor with years of research experience:

Much of his quantitative research involves the use of intelligent mathematical and computer models, including neural networks, fuzzy logic, evolutionary systems, agent-based systems, artificial life, data mining, and simulation. In addition to university and industry research in price forecasting and trading system development.


...of course, the fact that he's still a college professor and that he's paying attention to Goldman kinda suggests maybe his "price forecasting and trading system development" hasn't been going too well.





On Jan 20 04:51 PM Storm Cat wrote:

> Dave Enke (the author above) can't even read correctly. The bloomberg
> article to which he refers quotes Goldman as expecting a rebound
> "in the SECOND half of the year" not 1H09 as Enke states.
>
> The energy articles on this site appear to be written by individuals
> with very little energy expeience.

Jan 20 06:58 PM

[northernuta...:]

another example of analyst / salesman trying to entice people back into the market. Come on everybody, this time you will make money, I promise.......

Jan 21 05:59 PM

[whoguess:]

100% agree. Can't be put better.


On Jan 20 03:31 PM Crossland wrote:

> Another self-serving “analyst” offers up some half-baked report in
> a lame attempt to boost prices in the short term, hoping to emulate
> what’s-his-name from Morgan Stanley, who sent prices soaring in June
> on speculation of a US$150-barrel by July 4.
>
> These guys are mere speculators who do not really “expect” a price
> rebound but, rather, are PRAYING for one to boost their pathetic
> bottom line. The financial collapse has completely discredited these
> morons. The big reason for the cataclysm is that the major players
> have been revealed for what they are: crooked, corrupt and INCOMPETENT
>
>
> Idiots!!

Jan 22 11:47 AM

[whoguess:]

100% agreeeee. Can't be put better.


On Jan 20 03:31 PM Crossland wrote:

> Another self-serving “analyst” offers up some half-baked report in
> a lame attempt to boost prices in the short term, hoping to emulate
> what’s-his-name from Morgan Stanley, who sent prices soaring in June
> on speculation of a US$150-barrel by July 4.
>
> These guys are mere speculators who do not really “expect” a price
> rebound but, rather, are PRAYING for one to boost their pathetic
> bottom line. The financial collapse has completely discredited these
> morons. The big reason for the cataclysm is that the major players
> have been revealed for what they are: crooked, corrupt and INCOMPETENT
>
>
> Idiots!!

Jan 22 11:52 AM

[whoguess:]

Obama now has the brightest staff to work under him to run the nation.
How much are they paid a year? A US president is paid in the neighbourhood of around $450,000, his cabinet ministers average around $200,000 each, and his oval office staff about $100,000 max. All these people are the brightest and shoulder the heaviest responsibilities.

Compare this with the astronomical tens of millions dollars that the CEOs of US investment banks and large corporations have been traditionally paid annually, you can see how much ordinary investors have been exploited and short changed. Unless there is a revolt at grassroots levels, this kind of insane and egregious ripoff will go on as business as usual once this financial meltdown is over.

Jan 22 12:17 PM