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Gold/Mining/Energy : Big Dog's Boom Boom Room
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From: ChanceIs11/11/2008 3:40:18 PM
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Goldman Says Credit Crunch Adds Long-Term Oil Premium (Update1)

By Grant Smith

Nov. 11 (Bloomberg) -- Goldman Sachs Group Inc. said that the credit crunch is causing crude oil futures to be more expensive for long-term than immediate delivery.

``Credit constraints'' are ``distorting the incentives to hold inventories,'' Goldman analysts led by Jeffrey Currie in London said in a report dated yesterday.

This has led prices for short-term oil contracts to become much cheaper than long-dated futures, an imbalance referred to as ``super-contango,'' the report said. ``The impact of the credit crunch on the oil market is not waning.''

The difference between the front-month contracts on the New York Mercantile Exchange and futures for delivery in 2016 is about $26 a barrel. A month ago the gap was about $11 a barrel.

A ``sharp decline'' in the number of trading positions held by speculative investors has contributed to the imbalance, which has ``worsened significantly'' since the tightening of credit conditions in September, according to Goldman.

``Economic weakness and credit constraints will continue to put pressure on oil prices'' in the near-term despite the fiscal stimulus package announced this week by China, the world's fastest-growing oil consumer, Goldman said.
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