Goldman Sachs Predicts Oil Will Reach $149 A Barrel By Year End

Posted In: Bubbles, Commodities, Currencies, Dollar, Energy, Gasoline, Natural Resources, Oil

Just when almost everyone was proclaiming the energy “bubble” had popped, global investment bank and securities firm Goldman Sachs comes along and rains on the parade. According to a Reuters piece earlier today:

Goldman Sachs reiterated on Wednesday its year-end price forecast of $149 a barrel for U.S. crude oil, and said strong fundamentals were a more important factor than a strengthening dollar.

U.S. crude oil prices hit an all-time high of $147.27 a barrel back on July 11.

The price forecast came in a research note dated August 19. Reuters reported:

“Although the recent correlation in dollar and oil prices is clear, it is important to emphasize that each of these assets are driven by multiple, varying factors… Put differently, there is more to oil than the U.S. dollar and vice versa,” the Goldman Sachs energy team said in the note…

Goldman Sachs said that despite the recent negative correlation between the U.S. dollar and oil prices, there was “very little correlation between oil prices and the U.S. dollar over the longer term.”

The Manhattan-based financial services firm said that it sees the crude oil market supported in the short-term by limited OECD oil stocks, a possible recovery in U.S. oil demand, near 10% growth in Chinese oil demand year-on-year in July, and a drop in non-OPEC production.

Reuters also noted that:

Earlier this year, Goldman Sachs equity analyst Arjun Murti predicted oil prices would spike to between $150-$200 before the end of 2009 due to his view of rising global demand and faltering supply.

The forecast for $149 oil comes at the same time a Reuters/Zogby poll was released showing most Americans think the worst is over for prices at the pump. From a different Reuters piece today:

Most Americans think that the worst of the fuel price spike that pushed gasoline above $4 per gallon has passed… according to a Reuters/Zogby poll released Wednesday…

The poll of 1,089 likely voters found that just under 13 percent thought gasoline prices would rise a lot between now and the end of the year. About one quarter thought prices would rise a little, while 18 percent said they would stay about the same.

Sources:

“Goldman Stands By Forecast of $149 For Oil”
Reuters, August 20, 2008

“Optimism About Oil, But Not Housing in Poll”
Reuters, August 20, 2008

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