U.S. crude oil futures will hit $109 a barrel in 2012 as new pipelines, rail lines and other infrastructure help relieve bottlenecks at a central gathering hub in Oklahoma and carry more oil from Canada and the northern U.S. to refiners on the Gulf Coast and elsewhere, according to a Goldman Sachs forecast.
The prediction represents a drop from the investment bank’s previous forecast of $123.50 a barrel and reflects the increasingly anxious outlook for the global economic recovery. The bank also trimmed its 2012 Brent price estimate to $120 a barrel from $130 amid growing fears of a European financial crisis.
Still, as U.S. prices rise, the gap will narrow between West Texas Intermediate, the leading U.S. benchmark crude, and Europe-traded Brent, which has at times in the past year traded at nearly $20 a barrel more than WTI, the investment bank said.
The difference in price has widened as rising oil production from the Bakken Shale formation in North Dakota and Canada’s oil sands has poured into the U.S. market and been stranded in massive tank farms in Cushing, Okla., creating a glut and depressing prices.
Meanwhile, Brent prices have soared in response to civil unrest in major oil-exporting countries in the Middle East and northern Africa.
The result has been that WTI has lost its prominence as a global oil benchmark and refiners in the Midwest, fed by Cushing oil, have received a sharp discount on the price of oil.
The spread between WTI and Brent has remained wide even as stockpiles in Cushing have fallen by 11 million barrels from their April highs, Goldman Sachs noted. But that should start to change by mid-year 2012 when new transportation infrastructure comes online that gets more North Dakota and Canadian crude to global markets.
The bank predicts the gap between the two will contract to $16 a barrel within three months, to $13 a barrel in six months and to $6.50 a barrel within a year.
what makes them think i care about their price of oil…
there are those of use who have no need for such junk when there’s other ways to get energy …
((( blink blink )))
The narrowing of the WTI to Brent spread is to be expected, due to WTI rising and Brent falling. Those who say KeystoneXL will not lower gasoline prices are wrong, if GS is correct here.
But this is all a WAG. All it would take is some unforeseen civil unrest in Saudi Arabia, and all of GS’s work goes out the window.
I guess the positive here, is GS must see our economy improving , or the global economy improving. That belies Ben Bernanke saying today that we are on the edge of a another recession.
That’s nice of Goldman Sachs to make a futures prediction on oil that influence the price, specially given their massive hedge fund is heavily invested in oil. What a jacked up system we have.
Sounds like Goldman Sachs is trying to protect it’s speculative positions to make sure the price is up so it can dump them.
Tell me again how relieving bottlenecks to refineries, and therefore increasing supply going to raise the price of the product? It goes against supply and demand. But that’s how speculators work with no over sight.
mark, if you were a refiner on the Gulf Coast, and you paying the current price of Brent, what $101 per bbl …………and someone connects you to a pipeline that offers oil at $77.
Which do you buy ?
So demand for WTI goes up, and the price rises accordingly.
And demand for Brent goes down, and the price falls accordingly.
Until, in the world that once existed, both Brent and WTI trade within a $1 to $2 range of each other.
Seems pretty simple and logical to me.
The only reason WTI sells for a deep discount now, is there is no buyers because they can not get the oil to market. Its a false over supply.
“But that should start to change by mid-year 2012 when new transportation infrastructure comes online that gets more North Dakota and Canadian crude to global markets.”
Um … tell me again the argument for opening up Arctic drilling… oh yeah, right, we need to remove our dependance from foreign oil sources.
But … um … then why do we have to get more out to global markets?
oh, wait … there is a glut. Gotta sell the extra. but … um … if there is so much extra why are we pushing to drill in the Arctic and offshore again? So we can sell to the global market?
Nice going ALEC. It looks like you bought off a few more congressmen. Gotta love a business group that drafts laws for the rest of us.
Bakken crude is showing up “in Philadelphia, …in St. James, Louisiana, and New Orleans”, per another news service. They can’t get enough rail tankers. So, when does a crude oil pipeline get built just for this area??
Anything specific yet?
John Davis: A good amount of the new shale fracking gas is going to get exported out of the US. These are the same frackers that said fracking would make the US more energy secure, until recently. Huh?
most of the Alaska crude now pumped ends up in Japan or it was when I last heard.
idiots only think that drilling in the US will reduce US dependence, Exxon does not care if the oil is comsumed here or in China.
John Davis, the global market would be the Gulf Coast refineries. That oil would displace oil imported to the US.
And that would be a global market.
I won’t take the time to educate you, because its already written in several places on this blog. But just look for ” bottleneck cushing ” , or maybe Google that phrase.
And you will see what getting the oil to global markets infers.
If you really wanna know, but something tells me you enjoy the bliss of ignorance, without it, you would have nothing to comment about on the internet.
Mike H, you bet your sweet rear that NG will be exported, as long as Obama and Congress can not find a good use for it here, which is not hard to do, if they would just do it. Either use it or lose it.
Ohhh but wait, its a fossil fuel and produces CO2 when burned, we can’t have that here …. now can we ???
And its funny, you don’t mind burning oil that is exported to the US. I mean really, is that not why those other countries exist, to provide you with oil ?
Okay, so Goldman was a big player and benefactor in the start of the 2008 recession. Funny how oil pushing over 100 dollars contiunes to set our economy back yet Goldman keeps making these irresponsible forecast to intentionally drive up the market prices and leverage their own funds.
Hmmm… I would say this is illegal but with Obama in their conrner what’s the use. Lot’s of people at the top of this glorified pyramid “scheme” are making money off of other people without any fear of the reprisals or investigations.
How about an audit of Goldman, oh sorry again Obama is involved and he just gave away 500 million to a scam solar company so why would he ruin a good thing now.
GS predicted $200 oil by December of 2008.
They’ve been wrong , many times. But no one wants to look at that.
fencesitter, you care to provide a link for that oil going to Japan ?
And even if it did go to Japan, it would be done to reduce transportation costs. Example, Japan buys oil from Venezuela, so Chavez ships the oil to the US and US ships oil to Japan, won’t be the exact scenario, but something close.
When we are using approx 19 million bbls of oil per day, and our domestic production is in the 7 million bpd range, then we are not going to be exporting oil.
You can not look at US raw export numbers and draw conclusions. US imports gasoline from the Euros, cause they over produce gasoline to get the diesel they need. Euros also sell gasoline to Latin America. Would it not be more efficient, for the Euros to ship gasoline to the US east coast, then refiners in Texas send gasoline to Latin America.
Bottom line, is we import far more oil and refined products than we can produce. These commodities are fungible.
How hard is that to understand ?
Nonsense.
“Tell me again how relieving bottlenecks to refineries, and therefore increasing supply going to raise the price of the product? It goes against supply and demand. But that’s how speculators work with no over sight.”
Gee If I can get a barrel of oil from Cushing where the restriction is to a Baytown, Texas refinery and export the REFINED products against Brent CRUDE costing $109, that will drive the price of oil up. The U.S. really is just enjoying a short respite from $100 oil due to that bottleneck.
Mike J, No, the US is not ” enjoying a short respite ” , your gasoline is being priced based upon Brent.
Just check the price of Louisiana Light , its equal to Brent.
And refineries in the north and northeast, are purchasing Brent.
Its middle America that’s getting squeezed. There’s no reason that gasoline in Oklahoma, where the Cushing tank farm is located, should not reflect the price of WTI, but gasoline in Oklahoma is in the same price range as the rest of the country.
I don’t know where you get this ” short respite ” , no one has seen that.
And btw, I thought it was obvious that GS see’s other factors driving the price of Brent higher, in spite of relieving the bottleneck in Cushing.
Why should any of the oil produced here in the US even go to the global market? China doesn’t export oil. Seems that after the needs of a country are filled and there is a surplus then export it.
That’s funny. All the real oil experts say it will be between 70-80 dollars.
@campbell, that’s what I’m hearing from oil analysts, trading range of $75 to $95, with occasionally getting out of that range.
GS can be wrong as often as they are right.
And @mark, I’m curious, where do you think the ” global market ” is located ?
I can’t wait to hear this answer.
The real reason that GS always has such a high target price is because its in their best interests to keep the price high. All of the investment banking, private equity and development all occur when oil prices are high. Pipelines, drills, ships, and storage tanks all get built when prices are high. Companies buy other companies when prices are high.
GS also do quite a bit of hedging for foreign governments and the high oil prices keep them trading. I also suspect that they have quite a bit of oil in their portfolio so they tend to talk up their own book. When prices fell to $35 a couple of years ago, they kept their price target at $100.