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Goldman Lowers 2013 Brent Price Target From $130 To $110

Tyler Durden's picture




 

Translation: Goldman is now buying Brent from its clients, aka Goldman 101.

From Goldman's David Greely:

A cyclically tight, but structurally stable oil market

 

Over the past three years long-dated Brent crude oil prices have stabilized around $90/bbl. This suggests a return to the pricing regime that characterized the crude oil market in the 1990s when long-dated Brent crude oil prices were anchored at $20/bbl. OPEC spare capacity anchored  longdated prices in the 1990s, however, we expect that going forward long-dated oil prices will be anchored by the potential for substantial growth in crude oil supplies from US shale, Canadian oil sands, and the deepwater. Net, we see a return to a structurally stable, but cyclically tight market.

 

The Brent market: Cyclically tight, but structurally stable

 

Brent crude oil prices have traded in an increasingly narrow range, where they are high enough to motivate supply, but not so high as to undermine the global economic recovery. With increasing evidence that Brent crude oil prices in the recent trading range have been sufficient to restrain oil demand in line with available supply, and with an improving outlook for non-OPEC supply growth in 2013, we are lowering our Brent crude oil price forecast to $110/bbl in 2013 (from $130/bbl). However, we continue to expect the physical market to remain tight and the Brent forward curve in backwardation. Consequently, we maintain our near-term target at $120/bbl, and continue to recommend a long position in the S&P GSCI® Brent total return index, which would benefit from the backwardation.

 

The WTI market: The barrels are coming by land and by Seaway

 

WTI prices have traded at an increasing discount to Brent as the barrels at Cushing await the development of excess capacity to transport them to the US Gulf Coast. We still expect this excess capacity will be achieved when the Seaway pipeline ramps up from its current capacity of 150 thousandb/d to its full capacity of 400 thousand b/d in early 2013. In the meantime, the addition of substantial rail loading and unloading capacity in 2012 has created excess capacity to move Bakken crude to the coasts. With Bakken pricing above WTI, we would expect less Bakken crude to flow south into Cushing, which should help to keep Cushing inventories from building too much as BP’s Whiting refinery undergoes conversion for more heavy oil refining. Net, we expect the WTI-Brent spread to remain volatile in 2012, but to narrow to -$4/bbl in early 2013 as the Seaway pipeline reaches its full capacity. As the US Gulf Coast becomes saturated with light-sweet crude in 2H13, however, we expect LLS will need to trade at a $2.00/bbl discount to Brent in order to direct increasing amounts of Bakken crude by rail to the US East Coast instead of to the US Gulf Coast. This will likely cause WTI-Brent to widen to -$6/bbl by the end of 2013.

As for how Goldman's commodity reco's have fared in times past, here it is:

 

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Thu, 10/18/2012 - 09:21 | 2900741 Quinvarius
Quinvarius's picture

Looks like oil is about to go through the roof if they are saying this to their cients.

Thu, 10/18/2012 - 09:24 | 2900749 SeverinSlade
SeverinSlade's picture

Get the gut feeling that an attack on Iran is for real this time.  With Obama losing a lot of support in the polls, a new war with Iran/Syria may be the only way for TOTUS to guarantee a second term.  Just look at the most recent Naval update.

Thu, 10/18/2012 - 09:33 | 2900782 Popo
Popo's picture

Agreed.  Goldman lowering the (public) target on crude is basically a call for war.    Right after the election.    Count on it.

Thu, 10/18/2012 - 09:57 | 2900858 SeverinSlade
SeverinSlade's picture

I'm banking on right before.  Perfect distraction that not only seals his victory but also then gives cover for raising the debt ceiling shortly. 

Thu, 10/18/2012 - 10:41 | 2900973 redpill
redpill's picture

Give up the black gold, dumb muppet fuckers!  The squid is hungry.

Thu, 10/18/2012 - 09:49 | 2900824 AurorusBorealus
AurorusBorealus's picture

Agreed.  War is almost a certainty... and Goldman just got word... don't know what contacts Blankfein and the other Jewish boys at Goldman could possibly have who could give them the inside sccop.

Thu, 10/18/2012 - 10:34 | 2900952 MassDecep
MassDecep's picture

Hey Sever, just manipulate the polls, (to make you perceive), and the election vote counts, (to verify your perception), to their desired outcome.

 

It's that easy...Either man is their man anyway.

 

Thu, 10/18/2012 - 09:23 | 2900751 GetZeeGold
GetZeeGold's picture

 

 

Lloyd is on line 2 Dr. Muppet.

 

Tell him to go screw himself.

 

Thu, 10/18/2012 - 09:32 | 2900781 buchesky
buchesky's picture

Tyler, why do you think Goldman has a conflict of interest in their oil call, but not their natural gas call?  Just because you agree with their natural gas call?

Thu, 10/18/2012 - 10:00 | 2900863 SeverinSlade
SeverinSlade's picture

Nat gas was a bit different.  Was at multi-year lows and everyone was panicking about it collapsing further.  Plus nat gas isn't as widely followed as crude (in terms of flashing red headlines).

High profile calls by GS are generally the ones that you go against (EURUSD, crude, treasuries, etc).

That's my take at least. 

Thu, 10/18/2012 - 09:33 | 2900783 Urban Redneck
Urban Redneck's picture

time to go long another 500 gallons of diesel

Thu, 10/18/2012 - 09:22 | 2900744 Fips_OnTheSpot
Fips_OnTheSpot's picture

They meant $1100. Glitches.

Thu, 10/18/2012 - 09:42 | 2900808 I Am Not a Copp...
I Am Not a Copper Top's picture

Glitchez bitchez

Thu, 10/18/2012 - 09:25 | 2900752 slaughterer
slaughterer's picture

I have to cover my oil shorts a.s.a.p.  This is serious.  

Thu, 10/18/2012 - 09:23 | 2900753 the not so migh...
the not so mighty maximiza's picture

gotcha, its going to 160

Thu, 10/18/2012 - 09:24 | 2900756 EatYourCornTake...
EatYourCornTakeyourPill's picture

Is it safe to assume Brent is going to 160?

Thu, 10/18/2012 - 09:25 | 2900761 LawsofPhysics
LawsofPhysics's picture

So, no war then?  Why don't I believe them?

Thu, 10/18/2012 - 09:27 | 2900769 LongSoupLine
LongSoupLine's picture

Just another day of God's work...carry on.

Thu, 10/18/2012 - 09:35 | 2900788 slackrabbit
slackrabbit's picture

So they think its going to $200 ;-)

Thu, 10/18/2012 - 09:40 | 2900800 LoneStarHog
LoneStarHog's picture

As much as I absolutely hate Goldman Sucks, I despise their MORONIC clients even more. Screw them good, Sucks!

Thu, 10/18/2012 - 09:44 | 2900813 Doubleguns
Doubleguns's picture

Create a dip then they buy like hell.

Thu, 10/18/2012 - 09:46 | 2900820 ziggy59
ziggy59's picture

When is it Squid season?

Thu, 10/18/2012 - 10:31 | 2900951 d_taco
d_taco's picture

130 is absurd.

Thu, 10/18/2012 - 10:41 | 2900975 SillySalesmanQu...
SillySalesmanQuestion's picture

All of your muppets belong to us.

Thu, 10/18/2012 - 10:48 | 2900993 chistletoe
chistletoe's picture

natty is collapsing?

 

what did i miss?

 

http://finance.yahoo.com/q/bc?s=ECA&t=1m&l=on&z=l&q=l&c=

Thu, 10/18/2012 - 10:53 | 2901002 MGA_1
MGA_1's picture

A wonderful group of people...

Thu, 10/18/2012 - 11:21 | 2901081 GFORCE
GFORCE's picture

A worrying call!

Thu, 10/18/2012 - 11:29 | 2901110 THE DORK OF CORK
THE DORK OF CORK's picture

How can yee guys be so sure ?

 

www.youtube.com/watch?v=U_eZmEiyTo0

Thu, 10/18/2012 - 12:26 | 2901336 ActionFive
ActionFive's picture

I don't see a crude market/DXY etal.

 Why don't they just say what price they are going to set crude at?

Thu, 10/18/2012 - 12:49 | 2901451 covert
covert's picture

the thing to do is to secretly buy into oil refineries.
http://covert.ias3.com/expose/

Thu, 10/18/2012 - 12:42 | 2901403 AlphaHunter001
AlphaHunter001's picture

 

Israel is about to have an election in January 2013 - it's essentially to get the mandate to strike Iran - until then oil should be in a trading range with a slight downward bias, but after the election if they get a majority, then buy oil as the strike will occur

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