Oil Outlook : From USD200/bbl to USD30/bbl

Remember this piece of news? Where is the prespoterousness in this report now?

Now Goldman is predicting oil price to fall to USD30/bbl in the next three months.

Analyst warns of $200 crude oil
By Javier Blas and Chris Flood in London
Published: May 7 2008 03:00 Last updated: May 7 2008 03:00

Crude oil prices could surge to $200 a barrel in the next two years, according to theGoldman Sachs analyst who three years ago correctly predicted a price "super-spike" above $100 a barrel.

The warning by Arjun Murti came as oil prices hit a fresh record high above $122 a barrel, boosted by supply disruptions in Nigeria, lower output in Russia and continued robust demand in China ahead of the Olympics.

Mr Murti said the energy crisis could be coming to a head as a lack of adequate supply growth was becoming apparent.

"The possibility of $150-$200 per barrel seems increasingly likely over the next 6-24 months," he added, warning also the spare capacity of the Organisation of the Petroleum Exporting Countries to cushion against unexpected supply shocks was low.

Last month, Chakib Khelil, president of Opec, also warned oil could reach $200 a barrel. The number of oil option contracts betting on oil hitting $200 a barrel in December have tripled since the beginning of the year.

Mr Murti's warnings carry weight in the oil market after he correctly predicted in March 2005 when oil traded at about $55 a barrel that prices could suffer a "super-spike" to $105 a barrel.
The warning in 2005 was criticised as "self-serving" because Goldman Sachs is one of the largest Wall Street investment banks trading oil and it could profit from an increase in prices.

The criticism forced the bank's chief executive at that time - Henry Paulson - to defend the bullish report. Mr Paulson is now US Treasury secretary.

Nauman Barakat, of Macquarie in New York, said: "The report should not be dismissed out of hand as preposterous as Goldman hit it on the head with its original super-spike story."

In New York, West Texas Intermediate crude futures yesterday jumped to a record $122.49 a barrel before settling at $121.84 while, in London, Brent crude futures closed at $120.31 a barrel.

The crude oil futures market signalled a growing belief that $100 a barrel is here to stay, with prices for oil to be delivered up to December 2016 trading above $110 a barrel. Kevin Norrish, of Barclays Capital, said the market was undertaking a "recalibration higher of expectations for long-term equilibrium oil prices".

Goldman said the unrelenting rise in long-dated oil prices was consistent with constrained supply driving demand rationing.