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Bloomberg.com May 16
Ambrose Evans-Pritchard has a little bit from the report and some Investment Bankers that do not agree.
What do you guys think of Lehmans' deep-water assessment?
Goldman boosted its price estimate for the second half of this year to $141 a barrel, from $107, citing supply constraints. China may increase fuel imports to generate power after the most powerful earthquake in 58 years killed more than 22,000 and damaged hydroelectric plants. Oil and commodities, including gold and platinum, also advanced on the falling dollar.
``We can blame Goldman again,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``In March 2005 they predicted that prices would rise dramatically, and they did. Prices jumped to the $125 level after another Goldman report less than two weeks ago. At this point nobody wants to bet against Goldman.''
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West Texas Intermediate, the benchmark oil grade traded in New York, will rise to $135.30 in the third quarter and $145.60 in the fourth quarter, Goldman said. Prices will increase further in 2009, averaging $148 a barrel, according to the report written by analysts including Peter Oppenheimer and Jeffrey Currie.
Goldman analyst Arjun N. Murti wrote in a report on May 6 that ``the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.'' Murti first wrote of a ``super spike'' in March 2005, predicting crude may trade between $50 and $105 a barrel through 2009.
``The Goldman report gives fund managers an excuse to push prices higher,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York.
Hedge-fund managers and other large speculators increased their net-long positions in New York crude-oil futures in the week ended May 13, according to Commodity Futures Trading Commission data released after floor trading ended today. Longs have outnumbered shorts since February 2007.
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``We can blame Goldman again,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``In March 2005 they predicted that prices would rise dramatically, and they did. Prices jumped to the $125 level after another Goldman report less than two weeks ago. At this point nobody wants to bet against Goldman.''
[..]
West Texas Intermediate, the benchmark oil grade traded in New York, will rise to $135.30 in the third quarter and $145.60 in the fourth quarter, Goldman said. Prices will increase further in 2009, averaging $148 a barrel, according to the report written by analysts including Peter Oppenheimer and Jeffrey Currie.
Goldman analyst Arjun N. Murti wrote in a report on May 6 that ``the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.'' Murti first wrote of a ``super spike'' in March 2005, predicting crude may trade between $50 and $105 a barrel through 2009.
``The Goldman report gives fund managers an excuse to push prices higher,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York.
Hedge-fund managers and other large speculators increased their net-long positions in New York crude-oil futures in the week ended May 13, according to Commodity Futures Trading Commission data released after floor trading ended today. Longs have outnumbered shorts since February 2007.
Related Video and Graphics
"We believe the current energy crisis may be coming to a head. A 'super-spike' end game may be in the early stages of playing out," said Arjun Murti, the bank's energy strategist.
Goldman Sachs said a chronic lack of supply would lead to a "dramatic and continuous rise in oil prices", followed at some point by a sharp fall in oil demand as consumers retrench.
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Goldman Sachs said the spare capacity of the OPEC cartel is already near "minimal" levels. There is a risk that Saudi Arabia will fail to meet output targets, suffering the same sorts of setbacks that have plagued Western oil companies.
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Citigroup said prices may fall to $40 a barrel within two years as the cycle turns in time-honoured fashion and fresh supply emerges.
Lehman Brothers said this week that crude prices had surged far ahead of rise in the underlying cost structure of the industry - typically a warning sign at the end of a cycle.
The drilling cost for oil and gas wells has actually fallen slightly over the last two years, and even deepwater rig rates have been flat after jumping five-fold since 2004. Some 65 deepwater rigs are coming on stream over the next two years, compared to 10 from 2002 to 2007.
Goldman Sachs said a chronic lack of supply would lead to a "dramatic and continuous rise in oil prices", followed at some point by a sharp fall in oil demand as consumers retrench.
[..]
Goldman Sachs said the spare capacity of the OPEC cartel is already near "minimal" levels. There is a risk that Saudi Arabia will fail to meet output targets, suffering the same sorts of setbacks that have plagued Western oil companies.
[..]
Citigroup said prices may fall to $40 a barrel within two years as the cycle turns in time-honoured fashion and fresh supply emerges.
Lehman Brothers said this week that crude prices had surged far ahead of rise in the underlying cost structure of the industry - typically a warning sign at the end of a cycle.
The drilling cost for oil and gas wells has actually fallen slightly over the last two years, and even deepwater rig rates have been flat after jumping five-fold since 2004. Some 65 deepwater rigs are coming on stream over the next two years, compared to 10 from 2002 to 2007.
"We believe the energy sector is about to see the explosion in the availability of rigs to explore and develop petroleum in deep waters," said Lehman Brothers, citing fields in the Atlantic Basin, the Gulf of Mexico, the northwest shelves off Alaska and Norway and new discoveries off the coast of Brazil.
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