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Goldman Blames Weather For Stronger Oil Prices, Sees WTI Sliding Back To $40

Tyler Durden's picture




 

As we noted over the weekend when we showed a simple contango math calculation by SocGen according to which storage costs imply another 20% drop in Brent prices, now none other than Goldman - which has been oddly bearish on oil over the past few weeks - says that its Brent forecast remains at $40/bbl for two simple reasons: i) the global inventory glut is set to resume and ii) it's the weather's fault there has been a slowdown in the crude build-up.

From Goldman's Damien Courvalin:

Clear skies after a perfect storm?

 

The global build in crude inventories has stalled: OPEC disruptions have returned, demand has been strong, refining margins are stellar and product markets are backwardated. And while the build in US inventories has surprised to the upside, E&Ps are exhibiting a faster focus on financial discipline than we had expected. Net, the past month has featured a reversal of the late 2014 perfect storm of bearish catalysts: weak demand, low disruptions and profligate spending. And while this reversal is consistent with a rational and efficient market response to the collapse in oil prices, the contribution of weather and the premature rally keep us expecting that prices will remain below the current forward curve in 2015.

 

Rather, a sunny spell soon to end

 

Weather has played a great part in keeping crude off the market, disrupting Iraqi exports (sandstorms) with cold weather in the US and drought in Brazil supporting demand. And while we reiterate our out-of-consensus view that demand growth will be strong in 2015, on the back of better economic growth and low oil prices, we did not expect demand to be so strong this soon with recent leading economic indicators suggesting that the activity pull is sequentially weakening. Our expectation going forward is therefore for the global crude inventory build to resume. As a result and absent further unexpected OPEC disruptions, we expect Brent oil prices and timespreads to reverse their recent strength although the lack of a meaningful build in the past few months leaves risk to our forecast for oil prices remaining at $40/bbl for two quarters skewed to the upside.

Goldman's longer-term, 2015-2016 forecast: "still overcast"

While E&Ps’ focus on financial discipline has occurred faster than we expected, US producers are already preparing to ramp up activity later this year by successfully raising equity, reducing debt and building an uncompleted well war chest. Coupled with the large availability of external capital, this leaves risk to our $65/bbl 2016 forecast skewed to the downside as these assets will quickly be redeployed in a lower cost environment. Net, we reiterate our view that prices need to decline relative to the current forward curve, on a resumption of the crude stock build and on our expectation that low prices are required in order for the capex and rig cuts to materialize into sustainably lower production growth.

As usual, the only question is whether Goldman is actively loading up on oil as it is telling its clients to position for weaker oil in the months ahead.

 

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Mon, 03/09/2015 - 08:05 | 5868856 GetZeeGold
GetZeeGold's picture

 

 

Remeber.....GS is looking out for you Muppets!

Mon, 03/09/2015 - 08:07 | 5868860 SickDollar
SickDollar's picture

More than ever

Get on the program now sheeple

Mon, 03/09/2015 - 08:13 | 5868874 Terminus C
Terminus C's picture

Goldman says to short oil... All in levered 20x!

Mon, 03/09/2015 - 08:28 | 5868897 cnmcdee
cnmcdee's picture

The Great Calgary Carnage Cometh?

  Something is happening in Calgary a preparation for an exodus is my inference - and anyone can watch this live - I will give you the link..  My neighbor comes by with some signs for a pile of office furniture he picked up from a Calgary office that ceased operations and he was liquidating out of his garage I guess.

On Kijiji - Serivces - Other my McAdd suddenly dropped to page 22 when it had sat stagnate in other cities.  When I looked there was page after page of pick up hauling ads / resume writing ads (job seekers) - haul away your trash for $40, haul away your trash (or valuables) for $50 / hire me to write your resume and of course those cashing in on the desparate and easily conned -  psychics.

Go look yourself - http://www.kijiji.ca/b-other-services/calgary/c87l1700199

A great exodus of people is about to leave the provice back to Ontario / BC / a few to Sask / LOTS back to the east coast.  So Calgary will see the housing pricing collapse first by the looks of it, followed by the rest of the provinces depending on when the EI runs out.

Get ready if you can short the Canadian Housing market somehow you are going to make a lot of money..

 

Mon, 03/09/2015 - 08:33 | 5868915 oudinot
oudinot's picture

cnmcdee: You are right. Canada is going to get fucked, real bad.

Mon, 03/09/2015 - 08:39 | 5868932 Haus-Targaryen
Haus-Targaryen's picture

I think something is about to go south in Europe again.  

Ghordo has one again gone missing.   

Mon, 03/09/2015 - 08:35 | 5868918 cnmcdee
cnmcdee's picture

Calgary Condos first to collapse :

http://www.theglobeandmail.com/life/home-and-garden/real-estate/in-calga...

Calgary Condo Developer <not!> Torches A Loss Project?:

http://calgaryherald.com/news/local-news/firefighters-battling-blaze-at-...

 

 

Mon, 03/09/2015 - 16:13 | 5870702 daveO
daveO's picture

Another possible motive at the bottom of article.

Mon, 03/09/2015 - 08:10 | 5868866 101 years and c...
101 years and counting's picture

crap.  as an oil bear, this scares me.

Mon, 03/09/2015 - 08:13 | 5868870 Thirst Mutilator
Thirst Mutilator's picture

So if that happens, I suppose we'll see a "1" handle on 87 octane unleaded for, like, about a day.

Mon, 03/09/2015 - 08:19 | 5868887 Youri Carma
Youri Carma's picture

Not necessarily:

Gasoline is rising five times faster than crude oil as refinery shutdowns limit supplies http://www.bloomberg.com/news/articles/2015-03-06/gas-pump-prices-rising-five-times-faster-than-crude-oil-in-u-s-

Pump Prices in U.S. Rise for Third Time Since June in Survey http://www.bloomberg.com/news/articles/2015-03-08/u-s-gasoline-rises-to-2-5384-a-gallon-in-lundberg-survey-i70oc7y8

Mon, 03/09/2015 - 08:42 | 5868938 Thirst Mutilator
Thirst Mutilator's picture

Wonderful! ~ Then it'll be odd-even license plates, gas rationing again!

 

I think I'll pull out my bell bottoms & disco records to celebrate.

Mon, 03/09/2015 - 08:35 | 5868895 Youri Carma
Youri Carma's picture

Indeed:

Exxon’s Russia Exposure Surges as Long View Outweighs Sanctions
3 March 2015, by Joe Carroll (Bloomberg)
http://www.bloomberg.com/news/articles/2015-03-03/exxon-s-russia-exposur...

And while Merkel is talking tough on Russia:

RWE to Proceed With Dea Sale to LetterOne - Despite British Objection, Transaction to Go Through Monday, RWE Says
1 March 2015, by Selina Williams - London (Wall Street Journal)
http://www.wsj.com/articles/rwe-to-proceed-with-dea-sale-to-letterone-14...

Fridman’s L1 Appoints Browne Chairman as RWE Dea Deal Closed
2 March 2015, by William Kennedy and Tino Andresen (Bloomberg)
http://www.bloomberg.com/news/articles/2015-03-02/fridman-s-l1-appoints-...

Mon, 03/09/2015 - 08:14 | 5868876 Youri Carma
Youri Carma's picture
Sasol, biggest producer of liquid fuels from coal expects average Brent crude-oil prices to be at least 30% lower during the second half of the financial year compared with the first and sees the rand-dollar rate being affected by quantitative easing in Europe. http://www.bloomberg.com/news/articles/2015-03-09/sasol-profit-rises-6-2-as-dividend-trimmed-after-oil-price-drop

Hedge Funds Are Losing Faith in Oil Rally While Inventory Swells http://www.bloomberg.com/news/articles/2015-03-09/hedge-funds-losing-faith-in-oil-rally-as-glut-builds-energy

Mon, 03/09/2015 - 08:32 | 5868907 Wild Theories
Wild Theories's picture

mismatch of headline vs content?

headline: GS says WTI $40

content: GS says Brent $40

Mon, 03/09/2015 - 08:42 | 5868939 Youri Carma
Youri Carma's picture

Good point. I think they mean WTI $40 so Brent $50.

Goldman Says $40 Oil Call May Be Too Low as Demand Surprises
9 March 2015, by Aaron Clark (Bloomberg)
http://www.bloomberg.com/news/articles/2015-03-09/goldman-says-40-oil-fo...

Mon, 03/09/2015 - 09:27 | 5869113 RadioactiveRant
RadioactiveRant's picture

IF Brent hits $40, WTI will be <$35

Mon, 03/09/2015 - 13:51 | 5870167 Burls
Burls's picture

I was gonna say that:

Fix the headline Tylers. The forecast is for BRENT @ ~$40 which means WTI @ ~$30.

Mon, 03/09/2015 - 09:39 | 5869156 northern vigor
northern vigor's picture

I read last week that crude oil storage in the world is just about maxed out, because oil stocks have been accumulating all winter.

The US is going to be full shortly.

I never trust GS

Mon, 03/09/2015 - 12:30 | 5869825 still kicking
still kicking's picture

Cushing is almost full but they are bringing new HUGE tanks online shortly, Houston and New Orleans storage tanks are no where near full and it's all light sweet crude which the refineries here in the US aren't fitted to process a lot of, back in the 80's bust they retrofitted to process heavy sour crude from overseas.  If we could export this shit to Asia we wouldn't be able to keep Cushing half full.

Mon, 03/09/2015 - 13:58 | 5870181 Burls
Burls's picture

US inventory is at 444Mb; by Wednesday it will be at 455Mb.

Total US storage capacity was 521Mb; new tanks will bring it up to 535MB at most.

If the build is ~10MB a week, that leaves EIGHT MORE WEEKS until everything pops.

Cushing inventories are moot at this point, the key issue is that TOTAL US STORAGE SPACE is quickly running out.

Mon, 03/09/2015 - 09:58 | 5869224 JoWazzoo
JoWazzoo's picture

Fsck GS --- "slowdown in the crude build-up"  WTF???  Every effing weekly EIA report of inventories set a record or near record.

Mon, 03/09/2015 - 12:31 | 5869831 still kicking
still kicking's picture

EIA is full of morons and idiots, don't trust anything those fuckers try to sell.  I'm not saying inventories aren't high or we are using more than reported I am just saying the EIA is wrong about 75% of the time.

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