Goldman Sachs Eyes $40 Oil As Weather, Violence Enter Modeling

Posted by ETFalpha ⋅ March 10, 2015 ⋅ Leave a comment

Filed Under $BNO, $ERUS, $FRAK, $RSX, $USO, $XES, $XLE, brent, Commodities, crude, Energy, Forecast, Goldman Sachs, GS, Oil, Plummeting Oil Prices

As Goldman Sachs looks towards a future $40 per barrel price of oil, private equity funds are building dry powder for further investments.

Goldman Sachs GS

With oil in a state of backwardation – the future price is higher than the current spot price, sometimes considered a positive sign for those wanting higher prices – Goldman Sachs Group Inc (NYSE:GS) says not so fast. In a commodities research note yesterday, the investment bank’s commodities research team predicted a U-shaped price model to come as they eye a future $40 WTI price target, down nearly $10 from today’s pricing levels.

GS-oil-weather

As the price of oil plunged during the fourth quarter of 2014 and then stabilized in early 2015, inventory began to tighten as prices found a floor from their freefall. Goldman Sachs oil analysts Damien Courvalin, Jeffrey Currie, Anamaria Pieshacon, Raquel Ohana and Caroline Lu attributed the inventory tightening to weather and mid-east political turmoil.

It was Iraqi sandstorms in the beleaguered Islamic nation that was in part the cause for hampering oil production, the report noted. Another weather related cause assigned to explain the temporary price stabilization in oil was cold weather in the U.S., as some regions, such as Chicago, having tied its coldest February on record and New York City experiencing its third coldest on record, pointing to increased demand.