Goldman (Sachs)sees oil price 'super spike' to $105 a barrel

Yahoo News! ^ | Thursday March 31, 05:58 PM

[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.

[RockinRight]

So what happens when the economy dips into a depression thanks to $4.84/gallon gas prices?

[aynrandfreak]

GS are dem investment bankers. They want the economy to do as well over the next four years as George Soros.

[SouthernFreebird]

Well thank goodness we had that' blood war for oil' /s

[Eric in the Ozarks]

I believe this is called, "talking your book."

[wrathof59]

pump and dump

[The South Texan]

"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.

[cyberdasher]

hmmmm, George Soros. Given his past interest in meddling in various currency markets, how do we know he's not playing with oil?

[Recovering_Democrat]

I'm not worried. The price will be what the market will bear, no more and no less.

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.

[IllumiNaughtyByNature]

So what happens when the economy dips into a depression thanks to $4.84/gallon gas prices?

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.

[aynrandfreak]

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?

[RockinRight]

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.

[Brilliant]

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.

[spanalot]

"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

[Deguello]

"The call, which would mean a possible doubling of oil prices from their current level, sent crude back above $55 per barrel"

This is called Market Manipulation and the above demonstates it. Somebody just made some bucks from this statement.

[OldFriend]

Yup. Remember Rubin came from GS. He wanted O'Neill to avoid downgrading one of their stocks so he could dump the stock and protect his investors at the cost of the little guy.

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.

[alrea]

GS are dem investment bankers. They want the economy to do as well over the next four years as George Soros.

GS prediction is best reason oil will be under $30 by year end.

[snowsislander]

For what it is worth, Goldman takes significant proprietary positions in commodities trading and in the energy business.

[Waterleak]

When that happens I'll be able to buy a nice house for real cheap.

[maestro]

Goldman (Sachs)sees oil price 'super spike' to $105 a barrel ....after the June 15th Nuclear War.....

figures.....

[On the Road to Serfdom]

I think you are talking about Enron, but maybe he did it for WorldCom too.

[RockinRight]

But will you be able to afford to drive to it??

[newzjunkey]

It'll get there in Southern California long before everywhere else I imagine. I personally don't believe OPEC will let this get so out-of-hand.

At-the-pump pricing is already at crazy near record levels.

[Tumbleweed_Connection]

Our oil prices which climbed at the end of Bubba's term had nothing to do with foreign oil's control of price let alone the "market". Ewacko regulations, inability to create refineries, and the shutdown of domestic drilling made us nothing more than the sitting ducks we are today.

[OldFriend]

All the big brokerage firms are corrupt. The chairman of the SEC under slick willie said he NEVER read the corporate filings.

Spitzer goes after the companies, gets them to pay fines and then protects them from lawsuits.

And the average person with their 401K or other pension plans is at the mercy of the crooks.

[Almondjoy]

Are you for privatizing the road system?

[JeffersonRepublic.com]

“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.”

What a bunch of BULL$#!T…

Someone should tell Fimat USA that the price of oil is dictated by the global market. Unless Saudi Arabia or Venezuela quits producing oil, stopping shipments to the U.S. will have no effect on the global price. I don’t think either country can do without oil revenue.

If Saudi Arabia decided it wouldn’t ship oil to the U.S. and instead would only supply oil to France, then France’s old suppliers would ship the oil to the U.S…. IT’S A GLOBAL MARKET!

There would have to be a worldwide conspiracy against the U.S. to deny us of foreign oil. And we would fight like a junkyard dog to put a quit end to a global embargo against our people.

Holtz
JeffersonRepublic.com

[ndkos]

Paging Henry Blogett...

[Brilliant]

It's a global market, but a Venezuelan cutoff would cause the price to go up here, though maybe not to $100 bbl.

It costs less to import oil from Venezuela because it's closer than other oil producing places. We import their oil because it's more efficient to do so. On the other hand, a Venezuelan cutoff would hurt Venezuela a lot more than us. They are able to get a better price for their oil in the US for the same reason.

[Finalapproach29er]

"The call, which would mean a possible doubling of oil prices from their current level, sent crude back above $55 per barrel"
This is called Market Manipulation and the above demonstates it. Somebody just made some bucks from this statement.
----
Yep, money-grubbing G.S. speculators, trying to make a killing at our expense. Dispicable.

[Recovering_Democrat]

I don't know if privatization per se is the answer, but as one who GLADLY pays extra $$ to use a turnpike and avoid the crowds on the interstate, pay roads DO have a place, in my opinion.

Government oversight is probably a pretty good idea for roads, though. Why do you ask?

[HKTechBoy]

I can assure you, GS cares more about making money than who's in the white house.

Also, the demand for Oil in China and India is continuing to grow. OPEC is at capacity, the prices are only going to go up, simple Supply/Demand market economics.

[M. Espinola]

Phil Flynn's overview is reasonable: '$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. 'It's just another reason to be long. There's no doubt we're in a new bull market for crude oil.'

Major supply disruptions of Persian Gulf based oil could very well occur when Iran's rouge regimé is finally dealt with.

Iran's fanatical Muslim mullah's, once confronted with being overthrown, unless prevented, might attempt to target their missiles directly on the largest oil fields in Arabia as a quick method to seriously provoke chaos in the international financial markets. Iran's terrorist promoting Islamic clerics could also lash out in another vicious outburst by deliberately sabotaging Iran's oil infrastructure, as Saddam thugs inflicted on the majority of Kuwait's oil wells toward the end of the Gulf. War.

Oil could conceivably soar well over $100 a barrel triggered by energy trader panic, soaring prices, if news were to break indicating the Saudi oil fields were ablaze after attacked by Iran.

All out pandemonium sweeping the energy markets could even result in crude oil temporally rocketing to $150 to $200 a barrel, if the situation in the oil exporting Gulf were to become dangerously chaotic. Don't laugh, in 1999 the cost of a barrel of crude dipped below $11 a barrel, remember?

Keep in mind prior to the Arab Oil Embargo of late 1973 daily oil prices hardly ever moved more then a few pennies per barrel a day. Currently daily $1 to $2+ price jumps (up or down) are common place.

Removing this much exported oil off the market will be extremely deleterious to the world-wide oil dependent economy.

[RayChuang88]

I'll almost bet you even money that Soros' own Quantum Investment Fund may be meddling in the oil futures market. I have this feeling that the FBI and the SEC may be looking at the finances of Soros, Warren Buffett's Berkshire Hathaway company, and Goldman Sachs to see if they're deliberately interfering with the US economy by shorting the US dollar and deliberating causing an oil price rise.

[Attention Surplus Disorder]

One should be very suspect of this $105 dollar call on oil. I would not be surprised if they closed all their long positions today and went long on the Stock Market. It makes sense, tout oil; make the SPX drop, accumulate the SPX on the way down, sell oil at the top, sell the SPX on the pop. Lather, rinse, repeat. I do not, however, think oil will drop that much. I'm calling attention to a standard brokerage practice.

[aynrandfreak]

You're right, and not only because they may be using this 'news' to sell out to the suckers, but because these over-the-top predictions are also just usually good indicators of a trend change (i.e. Nasqaq 40,000)

[jonrick46]

You can follow right now the increase of the price of oil commodities. The danger is when it becomes overvalued and then follows with a repeat of the dotcom bubble burst. Then the little people with 401Ks and pension funds will suffer.

[Attention Surplus Disorder]

Well, I don't happen to think the market is in for any great shakes either; one would have to have the swift technology and near-infinite capital of a GS to capitalize on such a combination move, as I don't EITHER move will be that dramatic. It's not looking like such a great stock market to me from here; IOW, whatever market pump GS is able to induce is in my mind a "get-out" effort on stocks. That's my take. (Recall they dragged Abbey Jo out a few days ago)

[Smokin' Joe]

You can follow right now the increase of the price of oil commodities. The danger is when it becomes overvalued and then follows with a repeat of the dotcom bubble burst. Then the little people with 401Ks and pension funds will suffer.

Check out 1982, 1986, and 1999 for bubbles bursting. The effects on the oil exploration and production infrastructures on the industry (not to mention on the people who worked there) of those price crashes are partly responsible for the fix we are in today.

There are roughly half as many drilling rigs in existance as there were in 1980, and many of the rigs drilling today are older than the ones which were cut up for scrap would be. (The new ones went back to the banks in '86, for the most part.)

[Axenolith]

WOW! An 8.5% pretax margin. I'm impressed... NOT!

But you can bet those profits are "obscene" to some folks...

[Iris7]

$4.84 per gallon is not correct, I believe. The price of gasoline is cost of crude, refining, transportation, profit, and taxes. Gasoline prices are not a function of crude price alone.

A reasonable rule of thumb at this time is twenty cents change in the pump price per gallon for a $10 a barrel change in crude price. That is, $105 crude would add about a dollar to the pump price.

Some states have automatic gasoline tax increases with increasing gasoline pump prices. Those folks will pay more.

[Almondjoy]

Not all taxes of course(I'm really not sure how much do) but some of these taxes on gas go to the making and maitenance of roads.

It's only logical that those who use the roads.. pay for them.