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WTI Tumbles Back Below $40, Goldman Warns Risk Of "Sharp Leg Lower"
After an exuberantv-shaped recovery of hawkish fed minutes, WTI Crude (Dec contract) has tumbled back below $40 this morning following warnings from Goldmn Sachs of the potential for a "sharp leg lower" to $20 handle given expectations for warmer-than-normal weather this winter.
As Goldman Sachs notes, Risks of a sharp leg lower remain elevated
Our forecasts reflect our belief that “financial stress” can solve the current market imbalances, by gradually reducing excess supply capacity as demand recovers. We believe however, that there are high risks that this may prove too slow an adjustment as inventories continue to accumulate. This is particularly the case in the oil market where storage utilization is nearing historically elevated levels. The risk of markets adjusting through “operational stress”, when a surplus breaches logistical capacity such that supply can no longer remain above demand, rather than financial stress, is now much greater.
Mild winter weather over the coming months (a concerning risk given current El Niño conditions) could see weak heating demand in the US and Europe. If this materializes, it would likely be the trigger for adjustments through the physical market, pushing oil prices down to cash costs which we estimate are likely around $20/bbl (see New Oil Order: Too full for comfort, published October 25, 2015 for more details). As such a drop in spot prices to cash costs would force rapid adjustments, it would likely be followed by periods of stronger returns in both spot and roll returns, as historically has been the case (1986, 1988 and 1998).
Charts: Bloomberg
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Does not matter if WTI is down, it will shoot up immediately again. WTI is just a ping pong ball for algos at thsi point.
Algos don't surf.
It's bleeding out. Patient is coding...
Thanks for alerting us to your current skimming efforts GS, you are right on the longterm plunge (and it has nothing to do with the weather!) but GS never plans out more than a quarter or two ahead so the muppets are going to get steamrolled again.
When Glencore folds and Goldman feeds on its carcass that's when oil will start to recover.
In the ball and 3 cup game the hustle and hustler has to provide a winner every once in a while...other wise no one plays.
Going to 20s.
RIPS
Well, it must be true, CNBC just ran a story on $26 oil with a disclaimer that there is only a 15% chance of this outcome... Where is Gartman when you need him?
Goldman warns of lower prices?
Better buy it...
If it's warmer won't people drive more?
Wasn't that whole narrative the last couple years? It's cold people are staying home.
This is America. Logic, reason, and long-term memory are not wanted here.
Words used to explain stochastic movements are random too. The *blank* weather this *blank* caused by *blank* has resulted in a *blank* in share prices of *blank* (which GS will front run and use to bugger the muppets again).
Since fundamentals and technicals went out the window, Goldman has a monkey fucking a football as their primary indicator...
Quit your job and start writing porn.
I've never understood why the media runs around claiming that the 'summer driving season' increases fuel consumption. That seems totally ass-backwards. Don't people normally drive less when they're on vacation? Aren't cars more efficient in the summer where engines don't have to warm up as much? Why has the media stooped to being a constant cheerleader?
Markets are reflecting the worlds chaotic behavior or the reverse?
WTF .... does the Squid still have a $325 outperform price target for Tesla ?
Plenty of oil. While usage declining in many places due to the downturn/recovery.
Low oil prices is the only thing that is keeping the miners from committing ritual Seppuku...
pushing oil prices down to cash costs which we estimate are likely around $20/bbl WTF? Where? Saudi Arabia maybe. Certainly not Eagle Ford or Canadian tar sands...
Siberia... The Saudis will destroy their own country to drive the Ruskies into the poor house... It's not going to work...
Look folks... the Saudis are the canary in this coal mine, and that canary is close to passing out... going to the global bond markets aggressively for the first time ever, plans to increase debt seven fold to 50% of GDP in five years, and finally a currency that's pegged to the USD which just keeps rising (which means they can't devalue unless they decide to float)... you tell me which way oil is going, but from where I sit it's going down... it wouldn't surprise me if we see $30 bbl before the year is out... I think the Saudis know this otherwise you wouldn't see them make the moves they're making...
Exactly, this is how GS skims their muppets.......get the long call right (maintains confidence) while killing them on the short trades.
Dr. Copper apparently has a case of ejecta-vomiting flu too. Searching for new lows below $200? Looks like it.
Maybe they'll re-issue copper pennies for the helicopter drop.
Oww! That would be worse than hail. I'm hoping for $100 FRNs because they're so pretty while the flutter downward, like a bunch of lovely dead butterflies falling from the skies. <sigh>
Can we get a campaign to have Barry put on the $1 Billion FRN once this deflationary crash flips?
At that point the only thing it will be good for is to wipe your ass with it...
Wow! So what you are saying is that supply and demand and business risk still exists in America? So curious. The good people of North Dakota, Texas and Shittsburgh were not complaining when the price of oil was artificially inflated by $60. Take your medicine and quit bitching!
$40$ to $20 ? With just 7 contracts short, one could easily make $141,000 (104,000 +37,000)...
If your shorts get blown out you can now get the community to pitch in on your GoFundMe account to help cover.
well, this was suggested as an alternative...
customer to me last night: "your gas prices are great. so low."
me to customer: "you know there's a downside to low gas prices don't you? like deflation? like job loss?"
customer: "who cares?"
Says the crack dealer to the addict.
Cui bono.
Must.keep.wti.over.40.
Now you know it isn't going to $20. My prediction remains an imminent trashing of the USD exchange rates by the bankers. Obomber doesn't want to go out looking like a complete failure. The bankers always want more. Desperation is setting in. A fake rally is better than no rally when all you care about is the color of the paint on the tape. And besides, Russia is destroying Obomber's ISIS oil facilities now. And they were selling cheap.
trashing of the USD exchange rates
That's a joke, right?
If anything is in the center of interest (no pun intended), it is to keep the run into the US Dollar going. Because that's the only thing that keeps it from imploding.
And that's also the reason the Fed will not raise rates soon - they will store that bullet to get fired later when the run into the US Dollar is abating.
i need a NEW DRUG...reading about oil for the last 6 months is about to drive me BATSHIT CRAZY...i have made money shorting crude and i bought uwti for 85 cents watched it go to 72 cents then split and i wound uup getting 11.95 which was actually 1.19 for 85 cents i paid...it went on up and i shorted clz15 at 47.75 an covered it at 41.45 but man it has been nerve racking...now today goldman and gary shilling say its going to 20...guess i will go long again if it makes it to 33...MEANWHILE I NEED A NEW DRUG WHILE I SIT ON SIDELINES