Goldman Raises Year-End Crude Forecast by 31% to $85

Always, always be skeptical of anything Goldman says regarding commodities.*
J. Aron is one of the company's crown jewels and was the springboard for CEO Lloyd Blankfein.**
From Bloomberg:

Goldman Sachs Group Inc. raised its forecast for U.S. benchmark oil by 31 percent to $85 a barrel for the end of 2009 and predicted further gains next year as demand recovers and supplies shrink.

“As the financial crisis eases, an energy shortage lies ahead,” Goldman analysts Jeffrey Currie in London and David Greely in New York said in a report e-mailed today. The bank set a 12-month price target of $90 a barrel for West Texas Intermediate crude, up from $70, and introduced a forecast of $95 for the end of 2010.

Oil posted its biggest monthly gain in a decade in May, and traded above $69 a barrel for the first time since November on speculation a global economic recovery will trigger a rebound in demand. A decline in the value of the dollar has also drawn investors to crude and other commodities as an inflation hedge.

The rally has been driven by the “unwinding of pricing dislocations caused by the credit crisis,” Goldman said in the report dated June 3. It’s a “prologue,” to a price recovery in the second half of the year as the global economy stabilizes and crude inventories decline, the bank said....

...Goldman closed its trading recommendation to sell WTI July crude futures on Nymex, which was put in place on April 17 when the contract cost $54.66. The trade had a loss of $11.56 a barrel, according to the report....MORE

*From our November 20, 2008 post "It’s official, Goldman capitulates on oil":

...Now Goldman is left with the ignomy of summarily abandoning the investors who listen to its research calls, telling them effectively that they’re on their own. On Thursday, Goldman said it was ”closing” its recommendations for oil trades. Meaning that in a perilous time when the traders who pay attention to Goldman’s recommendations could use some guidance the most, Goldman has opted to give them the least. And some traders are furious about it, comparing the maneuver to then-strategist Abby Cohen’s decision to abandon her targets for equity indexes in the fall 2001, citing the uncertainties abounding in the market.

Goldman specifically talked about four trade recommendations it previously issued, and said clients shouldn’t put any stock in them any longer. One particular trade, a Nymex-WTI swap on the 2012 contract, issued in September, when crude already had declined to below $70, suggested that the contract would reflate to a range of $120 to $140. Obviously, that hasn’t happened....MORE

Goldman marketed the fact that CalPERS and other long-only index buying institutions could piggyback on GS's status as a 'commercial' to avoid position limits by entering into swaps with the bank. The institutions thought it was a sweet deal, until it wasn't. If it comes down to throwing customers under the bus or protecting the propritary trading, there's no decision.

**"When Blankfein asked about his title, a boss at J. Aron said, 'You can call yourself contessa if you want.'"
-Fortune, January, 2006