Goldman Sachs Group Inc. cut its oil price forecasts as it sees a global glut persisting into 2016 on further OPEC production growth that may force prices to drop as low as $20 a barrel.
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GS cuts oil price forecast
Re: GS cuts oil price forecast
Remember this:
5/6/2008: Crude oil may rise to between $150 and $200 a barrel within two years as growth in supply fails to keep pace with increased demand from developing nations, Goldman Sachs Group Inc. analysts said in a report.
Here is what happened:
WTI Crude oil prices:
> 05.06.2008 $121.84
> 12.30.2008 $39.03
5/6/2008: Crude oil may rise to between $150 and $200 a barrel within two years as growth in supply fails to keep pace with increased demand from developing nations, Goldman Sachs Group Inc. analysts said in a report.
Here is what happened:
WTI Crude oil prices:
> 05.06.2008 $121.84
> 12.30.2008 $39.03
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: GS cuts oil price forecast
IMO there is some reason to believe that GS puts out articles like this in an effort to get their clients out of positions with a gain. Then they switch sides. That is exactly what they did during the 2008-2009 cycle. After they use FEAR to drive down the price of oil as far as they think they can, they will tell their clients to go long. It is clear to me that we are at the point in this cycle where supply/demand is balancing. Non-OPEC supply is going to drop by a lot over the next few months. Demand is going up by a lot over the next few months. - Dan
The GS article focuses on rising inventories. Of course inventories are going up. WE ARE IN THE MIDDLE OF SHOULDER SEASON WHEN INVENTORIES ALWAYS GO UP!!!!!!!!!!!!!!!!!!
1. There is ZERO RISK of inventories filling. We have 640 million barrels of above ground crude oil storage capacity in the U.S. and crude inventories will not come close to that level.
2. Within a few weeks refineries will be ramping up to produce heating oil.
3. Q4 is the highest demand period of the year. See chart at: https://www.iea.org/oilmarketreport/omrpublic/
The GS article focuses on rising inventories. Of course inventories are going up. WE ARE IN THE MIDDLE OF SHOULDER SEASON WHEN INVENTORIES ALWAYS GO UP!!!!!!!!!!!!!!!!!!
1. There is ZERO RISK of inventories filling. We have 640 million barrels of above ground crude oil storage capacity in the U.S. and crude inventories will not come close to that level.
2. Within a few weeks refineries will be ramping up to produce heating oil.
3. Q4 is the highest demand period of the year. See chart at: https://www.iea.org/oilmarketreport/omrpublic/
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: GS cuts oil price forecast
I guess when Goldman speaks everyone runs for the exit. It really seems that they have their own agenda maybe short positions who knows.
Re: GS cuts oil price forecast
IMO the GS report is bullish. For me it confirms that a rebound in oil prices is just ahead. Take a hard look at the today's IEA Oil Market Report and it is clear that crude oil supply/demand is moving back to a balance. Here is the link to the IEA report: https://www.iea.org/oilmarketreport/omrpublic/
Back in 2008 when GS said oil was going to $200, it was just a few months later that oil prices headed sharply lower.
Wall Street analysts tend to take short-term trends and extrapolate them over the long-term. GS is looking at the seasonal build in crude oil inventories and making the conclusion that inventories will fill up. THAT IS NOT GOING TO HAPPEN. We may see U.S. inventories move briefly over 500 million barrels before refiners beginning drawing them down for heating oil season. U.S. commercial oil storage capacity is ~640 million barrels.
If oil does go to $20, here's what will happen:
> All unnecessary drilling would stop. The number of rigs drilling for oil would drop like a rock, from 640 today to under 400.
> Well completions (more important) would move toward zero
> U.S. oil production, which is now falling by 200,000 BOPD each month, would drop off of a cliff. Keep in mind that we now have over 50,000 horizontal shale wells on steep decline. Production from existing shale wells declines by approximately 6% per month.
> OPEC would call an emergency meeting and cut production. Most of them were in panic mode when oil dipped below $40.
Back in 2008 when GS said oil was going to $200, it was just a few months later that oil prices headed sharply lower.
Wall Street analysts tend to take short-term trends and extrapolate them over the long-term. GS is looking at the seasonal build in crude oil inventories and making the conclusion that inventories will fill up. THAT IS NOT GOING TO HAPPEN. We may see U.S. inventories move briefly over 500 million barrels before refiners beginning drawing them down for heating oil season. U.S. commercial oil storage capacity is ~640 million barrels.
If oil does go to $20, here's what will happen:
> All unnecessary drilling would stop. The number of rigs drilling for oil would drop like a rock, from 640 today to under 400.
> Well completions (more important) would move toward zero
> U.S. oil production, which is now falling by 200,000 BOPD each month, would drop off of a cliff. Keep in mind that we now have over 50,000 horizontal shale wells on steep decline. Production from existing shale wells declines by approximately 6% per month.
> OPEC would call an emergency meeting and cut production. Most of them were in panic mode when oil dipped below $40.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group