Thursday, December 17, 2015

Goldman Continues To Call For $20 Oil

Hard to believe that just under eight years ago Goldman was making the argument for $200 oil.
Brent $37.12; WTI-soon to roll off Jan. $34.89; Feb. $36.18

From the Houston Chronicle's FuelFix blog:
HOUSTON — Crude prices sank to new lows Thursday, but Goldman Sachs warned prices haven’t dropped far enough to force the oil production cuts needed to balance the market.

Though current oil prices are projected to help curb U.S. production by more than half a million barrels a day next year, so far the nation’s rig count and domestic oil-company spending plans are too high to ease the global oil glut and lift prices by the end of next year. So, crude prices may have to plunge to $20 a barrel, Goldman said.

“Financial stress may prove too little too late to prevent the market from having to clear through ‘operational stress,’ with prices near cash costs to force production cuts, likely around $20 a barrel,” Goldman analysts wrote in a research note to clients on Thursday.

U.S. crude fell 67 cents to $34.85 a barrel on the New York Mercantile Exchange, tumbling below its lowest settlement of the year and toward seven-year lows. Brent, the international standard, edged down 13 cents to $37.26 a barrel on the ICE Futures Europe.

Goldman Sachs has predicted $20 oil before during previous periods of oil-market turmoil this year. This time, the bank’s analysts are positing the investment-grade oil producers that pump 85 percent of U.S. crude haven’t been hit nearly as hard by the market downturn as smaller rivals with high levels of debt.....MORE