Goldman reiterates oil price projection

[Palm]

Today oil prices dropped on profit taking and there is a real tug of war going on between those who think correction is over and those who think fundamentals point to prices staying essentially where they ended today and maybe lower over the next 1-2 years. Lots has to play out yet. But today GS reiterated it's expectations:

"Goldman Sachs on Monday said crude oil prices could fall to production cost levels if the current supply glut stretches beyond available logistical and storage capacity.

"Fundamentals remain weak and we view the market to be strongly oversupplied," the bank said in a note, reiterating its three-, six- and 12-month WTI price forecasts of $42, $40 and $45 per barrel, respectively.

Goldman also kept its three-, six- and 12-month Brent price forecasts at $47, $45 and $49 per barrel, respectively.

The bank forecast oil demand growth at 1.62 million barrels per day (bpd) in 2015, and 1.28 million bpd next year.

A recent rally in oil prices would probably reverse as it had little fundamental support, the bank said last week, reiterating its expectation that prices will likely remain"lower for longer".

The bank said its "broad, bearish view" remains unchanged in terms of the overall commodities complex."

[MartiniStocks9756]

The largest banks seem pessimist in the Energy patch and oil in general. Predicting little recovery in fact a possible significant decline according to CITI Bank I believe. Now others like Bernstein lining up for $80 next year. Others agree. What is a little investor to think and in the long run does it really matter what the price is going to be next year for oil. Where is it going to be for gas when the big old gas plant opens and we get 30% in 2021? That is an important question to have answered next year about this time after certification and FID is around the corner.

[Putncalls]

This is interesting. RJ and GS have very different views on this:
RJ: US producers won't frack without a profitable contract price
GS US shale producers will break even and stay in business
RJ: Demand growth will be 1.7+ MMBL
GS Demand growth will be 1.3 MMBL
RJ: and GS use 60$ as the current cost of US shale oil
RJ: is vague on shale oil expense reductions.
GS: Guesses that it will be 20%
RJ: uses a 7$ WTI Brent spread
GS: uses a 5$ WTI Brent spread
RJ: 60-70$ 2016 Brent
GS: 49$ 2016 Brent

[ArtM72]

On the other hand, should the essential question be what happens first? IOC reaches FID or the Cubs reach the World Series?

[Putncalls]

I'm suspecting that the current energy prices are slowing down the certification.

[MartiniStocks9756]

Well it has been over 100 years for Cubs right? Can't be 100 years for certification and FID. But if the Bengals win the Super Bowl it is only natural that IOC sells for $150 in February the next day after the game.

[Palm]

Problem is there's no way any of these guys or anyone else can say they know to any high degree of certainty. Too many scenarios which can still play out. And when there's uncertainty the pessimists usually rule. People taking profits today for now suggests oil prices will struggle for a while yet to go much higher.

[Palm]

IEA says oil demand to slow in 2016 based on factors including the IMF expectation that world economic growth will be lower. OPEC to keep pumping to drive out higher cost oil.

http://www.ft.com/intl/cms/s/0/e27ff724-...z3oRaOvauY

[jft310]

Part of this is a game of chicken . Who blinks first ? It's certain OPEC can't keep this up for years !!
Certain members would be broke .
With Goldman history needs to be followed . It's a large company with seperate divisions betting sometimes in different directions . Further what they say and what they do are quite different often .
Example during the housing meltdown they did deal after deal with housing bonds earning fees and said the under lying collateral was triple A . The deals all had prospectives proclaiming the safety of the bonds . Goldman earned fees yes on those bond offerings . Other Goldman divisions bet Billions those same bonds would blow up as they did .
So Goldman said the bonds were safe but bet they would blow up . Follow the money .
Oil is no different what is Goldman doing with their own money ?..
Best to use consensus estimates vs the current low ballers Citi and Goldman . On Wall Street one has to ask why do you have that position ?? Goldman said demand was low earlier which turned out to be ridulous . Goldman's estimate is up from $30 by the way .
Short term should have no impact on FID for Interoil and crew. Total has seen this movie before .

[Getitrt2]

I'm suspecting that the current energy prices are slowing down the certification.

Why?  I can see a possibility of slowing down FID if things are bad enough, which I think would have to be worse than now, but not slowing down certification under the SPA.