Goldman Sachs analyst Jeffrie Currie predicts that oil will rally swiftly and violently rise as bear market fundamentals like the war in Gaza and the Russian pipeline dispute dominate.
World oil demand is likely to fall by about 1.6 million barrels a day this year, the Goldman analyst said today at a conference in London. That’s bigger than the reduction expected by the International Energy Agency, which last week forecast a drop of about 500,000 barrels a day, or 0.6 percent.
“Thirty dollar oil reflects the same imbalances that got us to $147 oil,” Currie said at the conference. “The problems haven’t gone away. We still believe the day of reckoning is to come.”
Infrastructure constraints throughout the oil industry, from supply to transportation and storage, mean that despite the demand slump, “this is not 1982-1983 all over again,” Currie said. “The supply picture’s radically different, the demand picture’s radically different.”
“The key difference is that today there are no large-scale next generation projects that are going to save the world,” he added. “Commodity demand is exponentially higher than it was.”
$30 oil might be too low but what's the catalyst for a swift, violent rise? I don't see one. Industrial production throughout the world is going to fall through 2009. China's factories are slowing down. If anything, we are going to be a world awash in oil. Oil prices reached $140 because of concerns that there wasn't enough excess capacity. There is now plenty.
Until there are signs the economy is on the path to improvement it's hard to imagine any kind of sustained rally, especially a swift violent one.
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