Keep the fear growing: GS
Message 24379585
UPDATE: Goldman Raises Nymex Oil Outlook; $200/Bbl Possible
Last update: 3/7/2008 3:22:25 PM(Updates with more details and comments from report)
NEW YORK (Dow Jones)--The Goldman Sachs Group Inc. (GS) equity analysts who made waves by predicting $105-a-barrel oil nearly three years ago now foresee prices as high as $200 a barrel. A team led by Arjun Murti, head of Goldman's energy research team, in 2005 put forward a theory that oil prices were in the midst of a "super-spike" that could lift oil prices as high as a then-unheard of $105 a barrel. On Thursday the group's prediction was borne out, with front-month crude futures closing at $105.47 a barrel, above $105 for the first time ever. In a new report, released Friday, Murti and his team hiked their forecasts for oil prices in the next few years, predicting benchmark Nymex crude will average $95 a barrel this year, $105 next year and $110 in 2010. The analysts say $135 a barrel is now the high end of the spike range, but said a rebound in U.S. economic growth or major oil supply disruption "could lead to $150 to $200 a barrel oil prices." "In our March 2005 'super-spike' report, we first advanced our view that oil markets had likely entered a multi-year 'super-spike' period that would result in oil prices trading within a $50-$105/barrel price band; we characterized the upper end of the band as more likely to be driven by geopolitical turmoil and that recession was a key risk to our view," the analysts wrote. "In fact, oil prices have reached $100/barrel without extraordinary turmoil ('normal' turmoil we have always incorporated into our views) and the U.S. currently appears to be in recession." The equity analysts' view that oil will average $95 a barrel this year, up from a prior $80 forecast, brings it in line with the 2008 forecast of Goldman's commodities research team. In a separate report this week, the commodities analysts reiterated that they see crude averaging $105 a barrel a year from now. Goldman's forecasts tend to carry weight in the markets, not least because the bank has a big energy trading operation. The Goldman equity analysts added in their report that it remains difficult to determine how high prices would rise in the event of a major supply disruption. "We do not know, but believe our current $135 a barrel 'high-end' forecast will prove conservative," they said. "Crude oil prices as high as $150-$200 a barrel seem possible, given that at least a 50%-100% rise in end-user prices will likely be needed to force large amounts of demand out of the system." The report said if a major event causing demand disruption occurs, then longer-term demand growth in China, the Middle East, and India combined with struggling crude oil supply and rising marginal costs would inevitably sustain a continued upward march of oil prices. |
