This is a week old from the list of items on ODAC website. Oil price over last few days is not speculation driven.
Goldman Sachs: Forget The Funds,It's Project Costs Driving Oil
March 04, 2008: 02:43 PM EST
LONDON -(Dow Jones)- OPEC's oil ministers may blame speculators for driving oil prices into record territory but Goldman Sachs (GS), whose S&P GSCI Commodity Index is the world's largest, said Tuesday that fundamentals, not speculators, underpin scorching crude prices.
Analysts at the investment bank said in a report that talk of speculative money as the primary reason for whipping oil prices to a record high of almost $ 104 a barrel in New York Monday is overstated, with its long-term price of $85 a barrel rooted in energy project cost inflation and low spare capacity.
The April 2013 oil futures contract on the New York Mercantile Exchange traded at $98.45 a barrel late Tuesday and Goldman Sachs said its long-term forecast was more likely to rise than fall.
"We maintain that the recent oil price rally has been largely fundamentally driven and that the fund buying is more likely the result of rising prices rather than the primary cause," the bank said.
Many analysts and oil traders - and almost every minister from the 13-member oil-producing cartel the Organization of Petroleum Exporting Countries - have attributed the run-up in oil prices in recent weeks to funds hunting for a home to protect against inflation or fleet-footed hedge funds exploiting the twists and turns of the volatile oil market.
"The recent rally has been driven by the same long-term structural supply issues which have driven the energy price rally of the past decade, not investor buying," Goldman Sachs said.
"Escalating industry costs and the need to further motivate new investment in an industry that has largely exhausted spare production capacity continue to be the main driver of oil prices."
Funds, it continued, have played only a modest role in the price surge. Open interest in oil futures is below levels seen a year ago and net speculative length in the futures market isn't markedly higher than last summer, when prices were $30 a barrel lower than now.
- IMHO we are over halfway to US$200 barrel
INP Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
