Goldman Sachs last month made waves with its renewed bullishness on the outlook for oil, and it’s retaining this view despite the fall in crude prices since then from around $70 to hovering around $60. In a new note, Goldman’s commodities analysts say this recent sell-off “provides a compelling entry point” and have maintained the forecast for $85 for 2009 and $95 for 2010.
From the note:
For the most part, we view the oil sell-off as simply a correction in a rally that we believe
had run ahead of itself, raising the risk of a liquidation of speculative positions that has
materialized as expected. Thus, the recent declines have generally pushed prices back in
line with fundamentals that have been only modestly weaker than expected, leading to
moderate downward revisions to our near-term oil price views.
In contrast to the IEA, which last week said the destocking effect on consumption was not as big as previously thought and largely over, Goldman believes it still has some way to go:
Although we share the market’s concerns over recent weak distillate demand, we believe that much of this demand weakness can be attributed to the continuation of massive destocking in the US manufacturing base that is weighing on US demand today but is expected to slow and
eventually reverse as manufacturers deplete inventories.
Long Room members can read more there.
Goldman Sachs and the unrecognised energy crisis (FT Energy Source 04/06/09)