This page has been archived and commenting is disabled.

Goldman Is Now Selling Oil Equities: Advises Clients To Buy Oil Equities

Tyler Durden's picture




 

Following its admission yesterday that it is now buying oil by telling clients to sell Brent to $105-107 a monther after advising anyone who cares Brent was on its way to $130, today we learn that Goldman is actively dumping its prop, pardon, there we go again, flow, FLOW, inventory of oil equities to idiots, pardon, clients. As to how dropping crude prices and thus collapsing profit margins is beneficial for energy producers, that is one we will long be scratching our heads over.

From Arjun Murti:

Potential SPR release consistent with expectation of tight oil markets: We recommend buying the dip in oil equities.

There is no change to our Attractive coverage view for the integrated oils sector following news on June 23 that the International Energy Agency (IEA) was calling for a 60 million barrel inventory release from strategic petroleum reserves (SPRs) held by member countries. While we recognize that the potential release of SPR-held oil into commercial markets could weigh on oil prices in the near term (e.g., Brent oil prices fell $5/bbl on June 23), we believe the release is consistent with the bullish underlying fundamentals we have expected, including the following points.

  • We continue to believe effective OPEC spare capacity is limited, a point reinforced by the IEA’s comment that the SPR release is in part needed to meet summer oil demand—a remarkable admission, in our view.
  • We continue to believe that in a world of at least 3.5% global GDP growth, inherent global oil demand growth is likely to exceed non-OPEC supply growth. While there has been recent evidence that global GDP growth is slowing from very high previous levels of 4.5%-5.0%, the SPR release is consistent with our view that global oil demand growth is ahead of available supply growth.
  • In our view, the SPR release raises the likelihood of a “soft landing” occurring for global oil demand growth, as greater available oil supply will allow for more current oil demand to be met than would otherwise be the case (essentially by the amount of the SPR release).

Looking back at SPR releases by the United States since 2000, we find that there is not a clear pattern of outperformance or underperformance by the XLE on an absolute basis or relative to the S&P 500, though over the next six months (versus the date of announcement), on average the XLE rose by 3% and outperformed the S&P 500 by 5%. Given our economists’ view that global GDP growth will stay above 4% in 2011 and 2012 combined with our view of limited OPEC spare capacity and insufficient non-OPEC supply growth, we are buyers of the dip in oil equities.

We continue to believe oil equities are discounting about $80-$85/bbl Brent oil, well below current and forecasted levels. Our Buy-rated favorites  remain Cenovus Energy, ExxonMobil, Marathon Oil, Occidental Petroleum, OGX, and Suncor Energy as well as CVR Energy (CL) among refiners (Neutral sector view for refiners).

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 06/24/2011 - 10:19 | 1398300 Tense INDIAN
Fri, 06/24/2011 - 11:03 | 1398448 Libertarians fo...
Libertarians for Prosperity's picture

Arjun Murti is the same disingenuous fuckwad that coined the "super-spike to $200" rhetoric in May 2008, two months before oil began its epic decline of 80%, and five months after The Great Recession had already begun.     

He is nothing more than a despicable m/puppet for GSCI, enabling them to unload their oil futures at record profits, a mere 60 days before the world began to crack in half.

Nothing quite like $140 oil to trigger the "Big Short" dominos.  I'm sure Gary Cohn gave Murti an extra bowl of matzah ball soup at the '08 GS holiday party.     

Fri, 06/24/2011 - 10:15 | 1398302 SheepDog-One
SheepDog-One's picture

Who in the hell would be a 'Goldman client'? Are there really that many retarded multi billionaires out there? I dont get it.

Fri, 06/24/2011 - 10:37 | 1398379 Diogenes
Diogenes's picture

I don't either but I guess as long as there are more people buying on their advice than selling it short, they come out ahead. There must be a few banks and funds left  that don't read Zero Hedge.

Fri, 06/24/2011 - 10:57 | 1398457 ivana
ivana's picture

Greek gov

Fri, 06/24/2011 - 11:29 | 1398576 NotApplicable
NotApplicable's picture

Institutional managers of OPM?

Fri, 06/24/2011 - 10:15 | 1398303 Atomizer
Atomizer's picture

Tyler,

Might this suggest GS knows something about QE3?

Fri, 06/24/2011 - 10:20 | 1398308 SheepDog-One
SheepDog-One's picture

QE3 has at this point been priced in about 5x.

Fri, 06/24/2011 - 10:19 | 1398304 DaveyJones
DaveyJones's picture

everything they sell is oily

Fri, 06/24/2011 - 10:16 | 1398307 Dr. Richard Head
Dr. Richard Head's picture

PAPER!  Get your paper here!  Paper's hot....pick 'em up!

Fri, 06/24/2011 - 10:37 | 1398378 f16hoser
f16hoser's picture

I would trust GS with my life! You should too!!!!!!

Fri, 06/24/2011 - 11:27 | 1398580 NotApplicable
NotApplicable's picture

We don't have to, it's already been done for us.

Fri, 06/24/2011 - 10:38 | 1398382 mickeyman
mickeyman's picture

Oil companies benefit because now they will have fewer dollars, which are a notoriously depreciating asset. By contrast, they will produce (and sell) less oil, meaning they will hang onto an appreciating asset. ;)

Fri, 06/24/2011 - 10:43 | 1398393 Village Smithy
Village Smithy's picture

All the TBTF's realize that the days of predatory lending are over. They are looking to show the world that through there political power and invincibility they can make money hand over fist in the markets. Look out boutique hedgefunds you are about to become out of fashion as the moneyed class rushes to to the squid for wealth creation. Let's call the new business model "Predatory Trading".

Fri, 06/24/2011 - 10:44 | 1398402 augie
augie's picture

I have a strange feeling of Deja Vu right now... 

Fri, 06/24/2011 - 10:53 | 1398436 Greeny
Greeny's picture

brand OIL will go back to $120/b,
faster then they'll think.

Fri, 06/24/2011 - 11:39 | 1398619 SheepDog-One
SheepDog-One's picture

Really Greeny? Is this call as reliable as your 'I just went long Euro for 1.46' call the other day?

Fri, 06/24/2011 - 12:38 | 1398830 Greeny
Greeny's picture

Moron, if you are FX trader you should sell it already

at profit..

Fri, 06/24/2011 - 10:57 | 1398458 Implicit simplicit
Implicit simplicit's picture

Whatever I say is not what I do,

it is the opposite of what I tell you

I am Gladman Sucks

Fri, 06/24/2011 - 11:05 | 1398482 augie
augie's picture

If my kids ever give me shit about being a hypocrite, i'm going to tell them i'm just preparing them for real life. That way they aren't shocked when they grow up to find out that everything is not sunshine and lolly pops and santa claus is actual a psychedelic mushroom. 

Fri, 06/24/2011 - 11:50 | 1398660 snowball777
snowball777's picture

Maybe the sunshine is inside the shroom.

Fri, 06/24/2011 - 12:03 | 1398724 augie
augie's picture

Heh. I dont think you can be taught that by anyone other than the mushroom itself. 

Fri, 06/24/2011 - 11:01 | 1398464 ZakuKommander
ZakuKommander's picture

This would be hilarious if it weren't so pitifully sad.

Although, thinking about it, one shouldn't pity anyone getting taken by the Squid for a ride, so . . . LOL.

Fri, 06/24/2011 - 11:44 | 1398649 snowball777
snowball777's picture

Exactly, those wooliest of sheeple were a fire hazard. It's a public service.

Fri, 06/24/2011 - 11:03 | 1398470 ivana
ivana's picture

oil will drop for few months, spur stocks and than ... hate to think about it.

And after "then" even worse ...

Fri, 06/24/2011 - 11:31 | 1398599 NotApplicable
NotApplicable's picture

Maybe Obummer will go for the double-bonus in his game, Slay the Evil-Doer, by going all bunker-buster on Moammar?

Fri, 06/24/2011 - 12:02 | 1398722 ivana
ivana's picture

Obummer - gov will sell high now to refineries and fill up reserves low.

Chinese sheeps will buy even more cars and be happy for few months... than will come unpleasant surprise, than another one than oil>200USD

Oil is the ultimate weapon.

By the way - who is owner of oil reserve facilities? Is it same story like FED owned by private banks?

Fri, 06/24/2011 - 11:19 | 1398536 Fundemental Pri...
Fundemental Principles's picture

Sooo, they were for it,  before they were against it, before...etc. adnauseaum

Fri, 06/24/2011 - 11:39 | 1398602 NotApplicable
NotApplicable's picture

As always, it's like a bellows. First they suck, then they blow, fanning the flames of wealth transfer on each pump.

Combine that with the idiom of "shaking the tree," and you could say they aren't shaking it as much as they are burning it down.

Fri, 06/24/2011 - 11:58 | 1398692 topcallingtroll
topcallingtroll's picture

.

Fri, 06/24/2011 - 12:00 | 1398698 topcallingtroll
topcallingtroll's picture

Yeah maybe I am an idiot for buying into VDE at 105.5-ish with borrowed money. We will see.

Fri, 06/24/2011 - 12:00 | 1398716 Mark_BC
Mark_BC's picture

Just a more semantic / philosophical point -- there are no energy producers in our economies. There are no energy consumers either. What we do is "produce" entropy, or disorder, as higher ordered energy (oil and electricity for example) is converted to lower ordered energy (ie entropy increases). Our economies produce absolutely nothing, and this is why 99.9% of economists have it completely wrong, because they devlop their entire imaginary theories (be they Keynesian or Austrian or whatever other flavour you can think of) around the premise that we "produce" things, when we do nothing of the sort.

Fri, 06/24/2011 - 14:07 | 1399153 Rusty Shorts
Rusty Shorts's picture

"production" is actually "destruction" ... something or someone is destroyed somewhere when "production" takes place.

Fri, 06/24/2011 - 14:17 | 1399192 Rusty Shorts
Rusty Shorts's picture

 - take oil for example, oil companies like to proclaim "oh, we produced xxx million barrels of oil last quarter"...oil companies didn't produce dick, they just sucked an existing resource out of the ground and destroy the oil. The Earth produces material resources, production destroys material resources. Everything we think of as "civilization" is either mined or grown.

Fri, 06/24/2011 - 14:45 | 1399338 Mark_BC
Mark_BC's picture

Right on Rusty, finally someone who agrees with me.

Fri, 06/24/2011 - 12:09 | 1398741 evileye
evileye's picture

To sell some thing you have you need a suker to buy it.

 

Fri, 06/24/2011 - 12:12 | 1398745 evileye
evileye's picture

To sell some thing you have you need a suker to buy it.

 

Fri, 06/24/2011 - 12:21 | 1398769 dcb
dcb's picture

goldman selling to people it is attempting to get rid of, perish the thought

Fri, 06/24/2011 - 13:03 | 1398914 mendigo
mendigo's picture

Goldman says BTFD

They are investment bankers - it is their job to lie. WTF

Fri, 06/24/2011 - 13:59 | 1399104 Downtoolong
Downtoolong's picture

I think I finally figured out what Wall Street investment banks manufacture, it's volatility.

Sat, 06/25/2011 - 16:07 | 1401455 fmxconnect
fmxconnect's picture

Bingo- they get people into positions (their positions which were purchased before the recommendation), then create volatility to force stop losses with their "research" and their spoofs, and "banged closes", and gunned thin trading.

Do NOT follow this link or you will be banned from the site!