GOLDMAN: OIL OVER $100 IN 2011, GOLD TO $1,335
20 July 2010 by Cullen Roche
17 Comments
Goldman remains a long-term commodities bull. Their latest projections follow:
Source: GS
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Comments
$3.70/lb for copper 12 months from now. That would be the same time period when US and Euro fiscal policy should be pulling down GDP at around a 2-3% annual rate. Either they see supply shortages or they’ve got Chinese 2011 GDP running at least 12% with another ridiculous level of investment %. Or maybe it’s something else, excess liquidity from the commodity etfs, flight to commodities caused by all the “money printing,” ext. All I know is that the under looks pretty enticing.
I’ll take this opportunity…any opportunity…to kick GS.
I see their earnings were down due to slower client activity and lower earnings from trading. Gee…what a coincidence. Earnings down due to a lack of opportunity to front run your customers or a lack of opportunity in structured derivatives where you’re accustomed to creating a derivative for your CLIENT where the underlying assets are garbage, put your arm around the client and tell them what a great value the derivative is and when the client is finally convinced and purchases the derivative you tell your trading desk to short it and then use all your power to drive the underlying assets in the derivative into the ground.
Its very interesting their bullish view on oil. The global economy is slowing and they see rising commodity prices.
I think that commodities truly are in a super bull cycle.
Key metrics I look at. Despite ALL THIS BEARISHNESS from every corner, copper still remains near $3.00. And Hang Seng is over 20k.
Just things I look for…
what about Shanghai? @2650 at 1 year low,iron ore prices are down 36% from April, steel is down in china also, I saw the steel mills were selling under cost
“what about Shanghai?” good point. I don’t doubt that there will be slowdowns periodically, but 10 million Chinese are urbanizing annually. Indians as well. That is going to continue for 10 years minimum. The rise of Asia back to its normal part of global GDP %, should provide nice support for commodities for some time.
Marc Faber had the best comment in the world on this. He said that in the 90s home prices in Hong Kong plunged 80%. Yet none of the banks went bankrupt. Why? Because the owners had such equity interests that they did not default en masse as they have here.
Asia has the EQUITY. That will allow it to do many things in the near future. Is all roses, absolutely not. But for the commodity/ag space, I think the super bull cycle is intact.
Why do you bother posting this sell-side gibberish?
Despite GS’s negative press since the crisis, GS oil analyst is one of the few people we should pay attention to. He was the first to call $80 oil and $100 oil a few years ago when oil was in the $30~$60 range. The easy conclusion to reach is that oil will go down due the the sluggish economy, but the smart question to ask is: If this is the worst global recession since the Great Depression, then why has oil been stubbornly high in the $70~$80 range? Answer? Peak oil is upon us. Not only will we see $100 oil soon (as early as 2011 per GS), but I’m willing to bet that even your parents will see $200 oil in their lifetime. People who are bearish on oil have not the slightest inkling on soon Peak Oil will start affecting our lives in a huge, painful way.
Peak oil! Wasn’t that 2003, no 2007, oh right its 2011 now. Who cares when you have over 3.5 trillion barrels of PROVEN oil shale reserves, 50% of it right here in the US of A. The process to extract and refine oil from shale has been around and in use for hundreds of years. At $80 and above it becomes commercially profitable. So baring a similar speculative and temporary bubble (see 2007/08) how on earth do oil prices maintain a $100+ handle?
Your GS buddy got one call right, big deal. His firm also made out like a bandit on those trades both on the way up and certainly on the way down.
3421138532110 you’re right of course, Oil shale is the fuel of the future and it will be for a long time. That’s because the tecnology to extract it is not quite there yet, as a matter of fact it’s a long way off, but even they were to perfect it tomorrow the water resources that will be needed for the process just aren’t there. The tar sands, some of which have been in production for decades now, in an area where they have the water for the processes can’t save us from peak oil either because it’s costly and slow to develop (100 billion+ DOLLARS and ten years will bring another million barrels on line…maybe. we’re loosing 2 to 3 times that in conventional
production every year.
I never knew that oil, gold and copper will move up big in a period of major deflation over the next 3-12 months……..Learn something new every day…..
I think they miss the point (or prefer not telling all)…. There is Commodities and Commodities….
1) the “industrial & energy commodities” basket (oil, cooper, metals, etc) is quite bearish or flat, and will follow the economic trend. They can bounce if the double-dip fear is overblown. But it will be a bounce. COTs show the way for a bear or a range at the best.
2) agricultural commodities (soft and grains): they follow a 4-6 years cycle: preparing the land, begin the culture, creating the factories for transformation and so on. There were a real lack of investment in these sectors when the cycle was low, in 2009. Price were too low to offer a good return on investments. On the other hand, agricultural and soft follow the world population trend, which is up. Now the situation is underinvestment and under-capacity when demand is still growing.
=> Bearish on industrials/energy, bullish on soft/grains. I am more or less in line with their projection for grains. But i had this setup in april, when i shift form equities to agri. Now they try to make u rush in the last train…
as they are starting yet another WAR, of course oil will rise. DUH
isn’t this the same GS that said oil was going to $300 in ’08?
You would think from reading these posts that the citizens and governments of the world will continue to use fossil fuels for another century….it’s laughable. You truly have to have a short term scope to believe in this non-sense.
And why is that, quark? Forget oil shale. What about oil-from-coal and even coal, itself? And then there is the thorium in coal for use in nuclear reactors. Why is “peak oil” going to be such a big deal?
I guess quark’s non-response means he admits he is wrong.