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Goldman Says Oil Could Go to $20 or $200 Depending on What Time Period you Live In
I have a very difficult time believing that we will see $20 oil. $20 oil and you will likely see some manner of crisis in energy with defaults and more significant distress to the majors (dividends dropped in one or more names.) I don't want to see what $20 oil looks like in other words.
I'm inclined to believe that this is something of a bottom similar to the $200 call, but I don't think oil turns around tomorrow, either. My guess would be a range for a while and taking a year or two to work gradually higher. The demand would seem to be there.
"In terms of OPEC supply, the agency said production dropped by 200,000 bpd in August – led by declines from Saudi Arabia, Iraq, and Angola. This was somewhat expected, given pipeline issues in Iraq and seasonal demand waning in Saudi. It did, however, expect OPEC to pump 31.3 mn bpd next year.
"Why don't they just admit they have no idea where oil will go"
But they do, they're using just one algorithm: Look at the direction of the trend, then apply a factor of two to the recent extreme price.
At the time in 2008 prices were going up, likely they'd risen to about $100 at the time of the article (I know they peaked higher than that), so GS doubled that and said, "worst case, $200".
The current trend ignoring volatility has been downward, and the bottom so far has been around $40. Apply the factor of 2 rule, and you get a "worst case, $20".
Agree with the futility of calling oil or any other commodity price far in advance. BTW: John C. put up a good link last winter predicting $30 oil. And WTI actually got down to around $38 a few weeks ago, but quickly rebounded to around $45 where it sits today.
I've wondered lately whether the extreme bear in commodities may be the "flip-side" (logical result) of the long standing bond bubble. Fixed-rate bonds benefit from stable or declining prices. Oil and commodities, on the other hand, benefit from rising prices (inflation). From that perspective they'd seem to be polar opposites for those looking to predict future value among asset classes,
Comments
I'm inclined to believe that this is something of a bottom similar to the $200 call, but I don't think oil turns around tomorrow, either. My guess would be a range for a while and taking a year or two to work gradually higher. The demand would seem to be there.
"In terms of OPEC supply, the agency said production dropped by 200,000 bpd in August – led by declines from Saudi Arabia, Iraq, and Angola. This was somewhat expected, given pipeline issues in Iraq and seasonal demand waning in Saudi. It did, however, expect OPEC to pump 31.3 mn bpd next year.
So while it sees the supply side tightening, it also boosted its projection for global oil demand growth. It now sees demand in 2015 rising to a 5-year high of 1.7 mb/d, while maintaining its view for next year of +1.4 mn bpd. Robust." (http://fuelfix.com/blog/2015/09/11/iea-upgrades-demand-slashes-non-opec-supply-and-oil-prices-tank/)
I'd be buying pipelines here. I'm not so sure I'll venture into oil majors again, but CNQ is somewhat tempting at $20.
But they do, they're using just one algorithm: Look at the direction of the trend, then apply a factor of two to the recent extreme price.
At the time in 2008 prices were going up, likely they'd risen to about $100 at the time of the article (I know they peaked higher than that), so GS doubled that and said, "worst case, $200".
The current trend ignoring volatility has been downward, and the bottom so far has been around $40. Apply the factor of 2 rule, and you get a "worst case, $20".
Seems perfectly reasonable to me
You want to laugh? Here...
Tomorrow I might wake up, look in the mirror and see Brad Pitt. Or I may not. It all depends on whether I lost my mind or not.
Someone please make news out of this.
I've wondered lately whether the extreme bear in commodities may be the "flip-side" (logical result) of the long standing bond bubble. Fixed-rate bonds benefit from stable or declining prices. Oil and commodities, on the other hand, benefit from rising prices (inflation). From that perspective they'd seem to be polar opposites for those looking to predict future value among asset classes,
It's like my manager asking me how much time I need for this project. Anywhere from 5 mins to 5 years! LMAO