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Goldman Can Now Predict The Price Of Oil In 2020

Tyler Durden's picture




 

Back in the summer of 2008, Goldman predicted that oil would rise to $200. Promptly thereafter, oil did rise to $150... and then crashed to $40 when the entire world nearly ended, and when Goldman et al grudgingly accepted a few trillion in taxpayer bailouts so their shareholders could bicker today over the helicopter landing protocol in the Hamptons.

Many were so amused by Goldman's epic inaccuracy of being wrong by about 80% just a few months out, that some got the blasphemous idea that Goldman was merely trading against its clients, who even had an internal codename: "muppets."

Goldman's historical predictive snafus did not prevent the company to come out in July of 2014 and forecast it that "The long-awaited global recovery appears to be getting on track, lifting commodity demand", in the process completely missing the imminent oil rout which saw oil tumble to $40 yet again.

And just to show that predicting 0 out 2 market routs and retaining credibility is about par for Wall Street, overnight the cephalopod company released its latest foreacst. And not just any forecast, but one stretching to 2017, 2018, 2019 and, yes, even 2020!

This is what Goldman thinks will happen not this year, not near year, but in five years.

We now assume WTI oil prices of $57/$60/$60/$55/$50 in 2016/17/18/19/20. We mark to market 2Q 2015 WTI oil price to $57.50/bbl. Our blended average 2H 2015 WTI outlook remains at $51/bbl.

 

 

We alter our target price methodology to reflect shale productivity upside but at lower prices. Our target prices continue to reflect a weighting on a fundamental value and a weighting on an M&A value. Our fundamental value is based on the average of: (a) our base value based on $65/bbl Brent oil ($60/bbl WTI oil) and $3.50/MMBtu Henry Hub gas; and (b) our shale efficiency scenario value based on $55/bbl Brent oil ($50/bbl WTI oil) and $3.00/MMBtu Henry Hub gas. Together, this blends our outlook for the medium- and long-term oil environment.

 

Our M&A values continue to be based on $85/bbl Brent oil ($80/bbl WTI oil) and $4.60/MMBtu Henry Hub gas.

Specifically for SandRidge, we adjust our target price methodology to reflect the potential for debt restructuring; which we view as likely necessary to allow the firm to adequately reinvest in the business. In this scenario we assume SD uses both secured debt issuance and debt-for-equity swaps to reduce gross debt from $3.6 bn to $2.5 bn. In our view, management is working diligently to restructure debt obligations having previously discussed the firm’s capacity to issue about $1 bn of secured debt and by completing an initial debt-for-equity exchange on 5/15. As such, we assign a 75% probability to the  debt restructuring scenario and a 25% probability to our fundamental blended SOTP NAV.

 

We believe the decline in oil prices and potential lower-for-longer environment will drive increased M&A activity over the next 12 months. This is supported by industry dynamics that provide an opportunity for companies with financial strength  and lower costs of capital to potentially acquire/merge with peers that have less financial flexibility and higher costs to the benefit of both parties.

Our suggestion as always: do what Goldman's prop, pardon flow, traders do which virtually always is the opposite of what Goldman tells its clients to do.

 

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Mon, 05/18/2015 - 10:00 | 6105364 firstdivision
firstdivision's picture

Going long those long dated years now. 

Mon, 05/18/2015 - 10:07 | 6105386 kaiserhoff
kaiserhoff's picture

Bless their pea picking hearts.

I can walk on water...,

  any time the lake is frozen.

Mon, 05/18/2015 - 10:11 | 6105397 jaap
jaap's picture

They still have dollars in 2020?

Mon, 05/18/2015 - 10:13 | 6105406 joseJimenez
joseJimenez's picture

Nope, It will be called the US Peso

Mon, 05/18/2015 - 10:18 | 6105427 Captain Debtcrash
Captain Debtcrash's picture

Too bad they are wrong so god damn always. Not out of incompetence, just setting up their clients to be traded against. 

Mon, 05/18/2015 - 10:43 | 6105492 clooney_art
clooney_art's picture

They are indeed doing God's work.

Mon, 05/18/2015 - 11:27 | 6105611 813kml
813kml's picture

Their God has horns and a tail.

Mon, 05/18/2015 - 11:26 | 6105607 KnuckleDragger-X
KnuckleDragger-X's picture

They use the HP Lovecraft economics textbook which requires a few "small" (virgins etc) investments by their clients......

Mon, 05/18/2015 - 10:53 | 6105520 CPL
CPL's picture

Yes, it'll come in an 8 pack in two ply though.  You'll be able to purchase it with Bitcoins.

Mon, 05/18/2015 - 10:09 | 6105393 kaiserhoff
kaiserhoff's picture

@first

How about some way out of the money puts & calls?

The safest bet is that they are way off the mark.

Mon, 05/18/2015 - 11:27 | 6105613 813kml
813kml's picture

I wouldn't even trust Goldman's predictions for 2010.

Mon, 05/18/2015 - 10:29 | 6105465 ZippyBananaPants
ZippyBananaPants's picture

I just bought puts on that piece of shit (GS) July 200's.  Wish me luck!

Mon, 05/18/2015 - 11:59 | 6105742 ZippyBananaPants
ZippyBananaPants's picture

And I just bought puts on Apple too, the July 125's.  I-Con must wanting to get out of his shares before the Greece shit hits the fan!

Mon, 05/18/2015 - 11:41 | 6105654 Kirk2NCC1701
Kirk2NCC1701's picture

And yet they can't predict the price of gas at the pump. 

But I can.  So can you.

Mon, 05/18/2015 - 10:01 | 6105365 espirit
espirit's picture

Oil in 2020?

We'll be lucky to be alive.

Mon, 05/18/2015 - 10:04 | 6105373 Low Tech Future
Low Tech Future's picture

If things go the way of one scenario that NASA is seeing, a massive ice shelf could break loose and result in an 11 foot sea level rise by 2020

 

Very scary.  

Mon, 05/18/2015 - 10:06 | 6105384 astoriajoe
astoriajoe's picture

we're gonna get those sea level increases any way we can.

Mon, 05/18/2015 - 10:10 | 6105395 Monetas
Monetas's picture

It might float up .... and the sea level will drop by 1.1 inches .... there, fixed it !

Mon, 05/18/2015 - 11:19 | 6105588 CPL
CPL's picture

Or it'll do what it always does at the end of an inter-glacial and start to snow non stop for 130000 years.  Point being sea change doesn't mean shit over a cycle, it's a symptom of larger cycle at work.

Where we are all going.

http://en.wikipedia.org/wiki/Glacial_period

Where we are all leaving. 

http://en.wikipedia.org/wiki/Interglacial

See the chart?  See that tiny little spec of a line?  That's all recorded civilization.  In those valley's, the surface temperature of earth gets about as cold as the surface as Mars.  While the oceans freeze over it cuts off the Phytoplankton that ensure any of you can breath since 80% of the worlds oxygen supply comes from water.  The atmosphere in turn collapses in stages, with no atmosphere acting as an ocean of air and water to insulate the surface of earth to keep things warm (or cool by acting as a blanket of solar protection), the heat literally drifts out into space and most everything dies off except pockets around the equator.

It really doesn't matter if anyone believes the glass is half empty or full at this point.  Logistics, organisation, poor political positioning, lame arms trade, sloppy inventory management...pretty much you are all dead meat regardless of your oil supplies or nuke plants or armies or how much money you've got.  The energy production, the social cohesion, the current social paradigms guarentee that 7 billion have the exact same chance of survival in those conditions as 10 million.  The odds of any making it to the other side of 130000 years is around 8000000000000000000000:1.  Believe me, none of you are that lucky.  In 130000 years no one will even know any of you ever existed, your cultures, your religions, your governments, your languages.  Nor will they care.  Time heals all of the past and the ice and water just wash it all away until who ever the next tenants are.

Now if people want to live their last years in complete misery with the current paradigms in place, that is their choice.  No one in the universe is here to fix mentally retarded morons.  So feel free to tear each other apart for the short time you all have, or smarten up and share it up to at least make yourselves comfortable while waiting for the snow to fly.  Or don't.  Free will and all that jazz.

Mon, 05/18/2015 - 10:29 | 6105464 pods
pods's picture

Too early to do the volume calculation needed to cause an 11 foot sea level rise worldwide, so I will just say this:

"That's a big twinkie."

To combat this imminent threat, I will forgo pissing into the ocean from now on.

pods

Mon, 05/18/2015 - 11:14 | 6105583 BoredRoom
BoredRoom's picture

"If things go the way of one scenario that NASA is seeing, a massive ice shelf could break loose and result in an 11 foot sea level rise by 2020

 

Very scary.  "

 

 

SHUT THE FUCK UP LOSER....

 

Global warming is a Chosenite lie.

Mon, 05/18/2015 - 10:02 | 6105369 Quinvarius
Quinvarius's picture

Now we know what price oil will never trade at on any given year.

Mon, 05/18/2015 - 10:06 | 6105381 Monetas
Monetas's picture

Que cinico eres !

Mon, 05/18/2015 - 10:03 | 6105370 Dr. Engali
Dr. Engali's picture

Well if they're predicting $50 a barrel oil for 2020 we better prepare for $200+ . Of course 5 years from now we will be well into WWIII, so we have that going for us.

Mon, 05/18/2015 - 10:37 | 6105479 Boxed Merlot
Boxed Merlot's picture

5 years from now we will be well into WWIII...

It seems they’re tipping their hand to this with their "...increased M&A activity over the next 12 months..." comment. 

Of course with their thick as thieves infiltration of every known government structure on the planet, maintaining currency equivalents is simply a by-product of their Pinky and the Brain calling of “Trying to Take Over the World”.

Carbon Credit legislation, acceptance, implementation and prosecutorial enforcement issues are of far greater importance than what a circa 2020 US petrodollar will be valued at.

Jmo.

 

 

Mon, 05/18/2015 - 10:37 | 6105480 pods
pods's picture

5 years from now assless chaps will be back in style.

#Madmax

Mon, 05/18/2015 - 11:20 | 6105596 BoredRoom
BoredRoom's picture

Utter nonsense. As if they ever went out of style.

Mon, 05/18/2015 - 10:05 | 6105374 Monetas
Monetas's picture

If they can predict crude .... why can't pre-dick gold .... they manipuflate it ?

Mon, 05/18/2015 - 10:05 | 6105375 101 years and c...
101 years and counting's picture

after the crash in 2015, that truly revealed the greater depression, i think oil, and the economy will start rebounding in 2020.  oil may even get as high as $25 that year.

Mon, 05/18/2015 - 10:06 | 6105382 SillySalesmanQu...
SillySalesmanQuestion's picture

But, but, they say it with so much conviction, clarity and honesty....

S/

Mon, 05/18/2015 - 10:07 | 6105388 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

$50?!  Do ya get to keep the steel barrel?   Always nice to have a few of those around...

Mon, 05/18/2015 - 10:12 | 6105401 kaiserhoff
kaiserhoff's picture

Oak barrels are about $60 around here,  used.

Mon, 05/18/2015 - 10:16 | 6105415 Monetas
Monetas's picture

A barrel is a package .... in the form of a wheel !

Mon, 05/18/2015 - 10:08 | 6105390 farmboy
farmboy's picture

Goldman cannot even notice when their own trousers are on fire let alone predict the future.

 

Mon, 05/18/2015 - 10:09 | 6105392 kaa1016
kaa1016's picture

Absolutely usless info from Goldman.

Mon, 05/18/2015 - 10:14 | 6105409 Arnold
Arnold's picture

Very optimistic that they project demand to skyrocket like that.

Deflationary dollars too?

Not even priced in Renminbi?

Mon, 05/18/2015 - 10:17 | 6105422 Loucleve
Loucleve's picture

More M & A.

This is supported by industry dynamics that provide an opportunity for companies with financial strength  and lower costs of capital to potentially acquire/merge with peers that have less financial flexibility and higher costs to the benefit of both parties........

Ahem.  To the primary benefit of goldman slachs as well.  Forgot about that.

Mon, 05/18/2015 - 10:18 | 6105428 wisefool
wisefool's picture

When will they publish the tax laws they will have the congress critters pass year by year? I'd like to know what type of job to work on a yearly basis.

Mon, 05/18/2015 - 10:18 | 6105430 Chippewa Partners
Chippewa Partners's picture

Lloyd doing Gods work again...........what a smart trader with his backstops............. 

Mon, 05/18/2015 - 10:23 | 6105446 sudzee
sudzee's picture

Conveniently left out of the caculation was a 50.00 carbon tax and a 20 gallon barrel.

Mon, 05/18/2015 - 10:27 | 6105456 wisefool
wisefool's picture

'Mericans will never accept consuption taxes on the nessecities of life. /sarc 

Mon, 05/18/2015 - 10:36 | 6105475 Amish Hacker
Amish Hacker's picture

The last crisis demonstrated that the best way to get rich quickly without working is to sell the muppets a financialized "instrument" that is doomed to fail, then bet big against it. Genius.

Mon, 05/18/2015 - 10:40 | 6105487 LawsofPhysics
LawsofPhysics's picture

LOL!!!   Just more evidence that the "market" is now fully manipulated.

Mon, 05/18/2015 - 10:48 | 6105508 FreeShitter
FreeShitter's picture

Radioactive wastelands by 2020.....

Mon, 05/18/2015 - 11:00 | 6105550 raywolf
raywolf's picture

The wonderful thing about being a forecaster is when you are wrong you just rewrite the forecast..... and hey... if you are also a market maker it can work in your favor...

Mon, 05/18/2015 - 11:13 | 6105581 Q-Q-Q
Q-Q-Q's picture

They just make this shit up and then release the HFT hounds.

 

Woof woof.

Mon, 05/18/2015 - 11:26 | 6105608 falak pema
falak pema's picture

Looks like the Squid gang are all taking a trip to Hawai singing "its all nice n easy" as oil becomes cheap and real estate hits the moon !

The Supercycle continues! 

Mon, 05/18/2015 - 11:55 | 6105723 Niall Of The Ni...
Niall Of The Nine Hostages's picture

In other words, oil is going to the moon and the Fourth Reich will be replaced by a much freer and more prosperous Eurasian Union no later than 2020.

It would explain the panic in German bunds.

I dunno, sounds like excellent news to me.

Pity Alberta got stuck with a socialist government in the meantime. 

Mon, 05/18/2015 - 21:36 | 6108112 Abbie Normal
Abbie Normal's picture

Because raising middle-class taxes and user fees while not doing the same for the multi-billion dollar oil companies will endear the ruling party to the people...

Mon, 05/18/2015 - 14:17 | 6106321 ivana
ivana's picture

interesting ... very stable and ALWAYS diff brent-wtic aprox 10% ... ha ha ha it's because of some missing pipeline or what?

Or due to epic deflation coming in EU?

PS if these's were free markets , anyone could make billions trading wtic-brent. Now only few can. Few chosen criminals

 

 

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