Goldman Sachs raises possibility of $200 a barrel oil

[Moby]

I'm so glad the Cheney's number 1 issue when entering The White House was oil and not something like national security.

http://custom.marketwatch.com/custom/myway-com/news-story.asp?guid={4B702F7F-41F8-45F0-A133-630F12F2C764}

Goldman's projections foretell persistent turbulence in energy prices

By Steve Gelsi, MarketWatch
Last Update: 1:42 PM ET Mar 7, 2008

NEW YORK (MarketWatch) -- With $100-a-barrel here for now, Goldman Sachs says $200 a barrel could be a reality in the not-too-distant future in the case of a "major disruption."

Goldman on Friday also boosted by $10 the low end of its 2008-2012 projected range for crude to $60 a barrel -- significantly lower than current prices, to be sure, but a possible mark for oil if "normalized" trends return to the marketplace.

With the dollar's fall continuing and financial markets roiled by the credit crunch, commodities like oil have been drawing the fancy of increasing numbers of investors. Accordingly, Wall Street firms have been eager to adjust forecasts to incorporate fresh data on the global economy and energy supplies.

Goldman analysts Arjun Murti, Kevin Koh and Michele della Vigna said prices have advanced more quickly than Goldman had forecast back in 2005, when it predicted a range of $50 to $105 a barrel as part of its "super-spike" oil theory.

"We characterized the upper end of the band as more likely to be driven by geopolitical turmoil and that recession was a key risk to our view," the analysts said. "In fact, oil prices have reached $100 a barrel without extraordinary turmoil, and the U.S. currently appears to be in recession."

Tacking on $15 a barrel to all of its oil estimates, Goldman now sees average selling prices of $95 a barrel for 2008, $105 a barrel for 2009 and $110 a barrel for 2010. The high end of its range is now $135 a barrel -- but Goldman hinted that prices could be headed even higher.

"As the lack of supply growth and price-insulated non-OECD demand suggest a future rebound in U.S. gross domestic product growth or a major oil supply disruption could lead to $150-$200 a barrel oil prices," Goldman said.

While saying it has a bullish long-term outlook, Goldman acknowledged that oil prices could correct from recent highs.

Favorite picks among energy stocks include Frontier Oil (FTO: news), Cabot Oil & Gas (COG: news) and Pride International (PDE: news) in the U.S. as well as Eni (E: news), Repsol (REP: news) and Gazprom overseas.

Goldman also reiterated its view that oil prices could fall as normal market conditions return over the next four years.

"The core of our 'super-spike' view is that oil prices will keep rising until demand declines globally on a multiyear basis, resulting in the return of excess capacity and a lower cost structure," Goldman's analysts said. "Given this view, once excess capacity returns, we think prices can move sharply lower."

The analysts reiterated their "attractive" view on the European energy sector, but kept a neutral view on the Russian sector due to costs. It upgraded Transneft and Sibir Energy to neutral from sell after underperformance, and cut Imperial Energy to sell from neutral on capital-spending requirements.

[bigfootzx]

Read about the Enron Loophole Act, Bush and Cheny could care less about an unregulated market.

http://www.huffingtonpost.com/raymon...-_b_25463.html
Senators Carl Levin (D., Mich.) and Norm Coleman (R., Minn.), the ranking minority member and chairman, respectively, of the Senate Permanent Subcommittee on Investigations, are urging Congress to enact legislation that would close major loopholes in federal oversight of oil and gas trades. The so-called Enron loophole put limits on the ability of the Commodity Futures Trading Commission (CFTC) to prevent speculative trading in energy and commodity markets. It's interesting to note that since the Enron loophole went into effect in 2000, the price of crude has risen by nearly 500 percent. Coincidence? Perhaps.

To quote Sen. Levin, "Right now there is no U.S. cop on the beat overseeing energy trades on over-the-counter, electronic exchanges or foreign exchanges. . . . Enron has already taught us how energy traders can manipulate prices and walk over consumers if they think no one is looking. . . ."

Sen. Coleman cut to the chase: "We need to explore legislative ideas to ensure that energy prices reflect the true market forces of supply and demand. . . ." In the meantime, OPEC and the oil patch are munching their baloney sandwiches, salted with crocodile tears, as they lug their loot to the bank.

[Bill]

Since OPEC won't meet again to discuss changes in output until september, and nobody else has the capacity to pump oil to make up the difference, even small shocks will drive up the prices.

And at the very least, it's going to be an expensive spring and summer.

Since I believe that Simmons is right, and the Sauds CAN'T pump more oil at a sustained rate due to decline and depletion, I think OPEC will keep the output frozen, or even reduce it to get revenge on the mcbushes, in the fall.

And even tho Iraq has promised to pump another 500,000 BPD in 2008, it won't make up for as much as 4 million BPD declines from the non-opec producers.

Like Barclay's report says - the big news of this oil shock is that higher prices haven't stimulated increased production from non-opec sources.

The oilmen have always said, if the price of oil rises high enough, we can pump all that expensive and hard to get oil we have left.

But, 90+ a barrel, which has been the average for a number of months now, hasn't been enough to bring that supposed "expensive" oil into the market.

[Bill]

Something important to remember, is that the whole oil industry was waiting with bated breath to see if SA was going to increase OPEC output - because it is believed that ONLY Saudi Arabia MIGHT have excess capacity.

It is believed that NONE of the other OPEC states has the capacity to increase production.

When SA said no to Bush, it fits the oil industry model much discussed this winter, that said basically if SA doesn't increase output, it probably CAN'T increase output.

I've posted a number of articles about this here in the past.

Also, read the paragraphs about OPEC subssidies for internal use - the Oil states (the so-called Sovereigns) are using more and more of their oil internally, leaving less to sell on the global market.