8 members / 450 guests (24 hours)

An Interesting IDB update! And how IDB got even faster.  IDB is fast, reliable, and FREE to use. Just join and start posting!

Why Goldman Thinks You Should Go Long On Oil

Why Goldman Thinks You Should Go Long On Oil

zerohedge.com / by Nick Cunningham via OilPrice.com / May 12, 2017  12:23 PM

As pessimism sweeps over the oil market, a few prominent voices are unbowed, arguing that the market is well on its way towards balance.

Goldman Sachs’ head of commodities Jeff Currie said at an S&P Global Platts Conference in London this week that investors should probably be going long on crude oil because the market is already in a supply deficit. He pointed to the futures market, where the curve could be headed into backwardation – a situation in which near-term oil futures trade at a premium to contracts further out. That structure points to concerns about a deficit in the short run, which is why front month contracts would trade at a higher price than deliveries six or twelve months away.

But the backwardation is also a symptom of fears over long-term oil prices. Goldman Sachs has consistently argued that crude prices could remain relatively low for years to come as the cost of production has shifted lower. So, lower long-term prices have pushed the back end of the futures curve lower, with near-term prices trading higher.

READ MORE