Or, Colorado... They're smoking dope.
The current market had oil prices moving lower dramatically... as a function of Saudi production decisions made prior to signiificant evidence accruing showing demand was cratering... but, with prices already in free fall... demand has continued to decline... not rebound.
Guessing that that the shale oil producers will all go under in six months time, gutting supply and restoring American dependence on imports... at the same time they are betting that the world economy, rather than fall off a cliff, magically responds to the clown show version of QE (maybe) being orchestrated in Europe, now.
Of course, we'll have to see what kind of QE they do come out with this time... but, Europe does QE the way that the Fed raises rates... they talk about it, and kick the can down the road. In Europe, doing QE actually violates the law... and, they still have people over there who care about that... so, if they do come out with QE in Europe this week... it could blow up the Euro... or, the Euro and the European Union... not because of the election in Greece, but because the northern Europeans tire of carrying the load for southern Europeans who want Germany to balance their checkbooks for them... while making up any shortfalls...
For oil to boom again, in a way like that they forecast... you need the trifecta... you need the current price drop to succeed in shutting down shale oil production thus enabling "discipline" being restored in OPEC... you need the world economy to suddenly turn out to be healthy and robust, with growth accelerating... instead of on life support circling around the cusp of a deflationary depression...
That leaves only the wild card... "supply disruptions"...
I guess that has Goldman predicting that supply disruptions are going to happen ? So, they're saying the Russians ARE going to shut down oil and gas transfers to Europe ? Or, they are saying that there is going to be military action in the Gulf... with Russia moving to take over the oil fields of the Middle East ?
The Saudi's aren't perfectly transparent in relation to their plans... but, they also aren't certified as practitioners of MOPE... requiring that you think everything they say is being said to purposefully to influence others behavior rather than reflect real and honest opinion.
The Saudi's are saying they expect prices to stay low for quite a while... they've indicated at least for the first half of this year, and perhaps as long as two or three years... and they're saying that prices will NEVER again be allowed to rise the way that they did in the prior cycle... ie., they want to impose and sustain a permanent cap on oil prices that is set close enough to the margin in profitability of the shale producers that they can sustain a cap on the incentives to invest in shale production. You might throw into the mix that Saudi's value sustaining their position as monarchs in Saudi Arabia more than they care about prices at the margin... and their policy currently has them worrying about ISIS pumping Iraq's oil, the relaxation of sanctions that are allowing arch enemy Iran to make money selling oil... and the Russians trying to cow Europe, while having made an aggressive move to take over Crimea... one of the key requirements in the past military tradition of northern tribes launching military adventures in points south...
My guess is that what that means... is Goldman's engaged in a bit of a MOPE has them trying to massage the decline... saying either Goldman is already on the wrong side of the trade in oil, or they're trying to set others up for some misdirection... |
