News

October 20, 2008

That Was The Week That Was … In The UK Oil Equity Markets

By Daniel O’Sullivan

With WTI spot at US$72 per barrel and Brent spot barely holding at US$68, the wheels have definitely come off the oil bull wagon. Now the temptation for the herd is, if anything, to swing abruptly in the opposite direction - note Goldman Sachs finally emerging from the shell-pocked commodity bull bunker on Monday to slash its year-end price forecast from US$115/barrel to US$70, but emphasising that US$50 was well in sight as a near-term downside scenario. Talk about arse-covering. I’ve got a four-letter word for them, and not the one research clients who bought into their previous US$200 per barrel schtick just a few months ago will be using - OPEC.

The cartel has been ruffled enough to drag forward an already-extraordinary meeting scheduled for November to this coming week, and no prizes for guessing why. Surely even the crucial swing-producing Saudis will baulk at letting prices collapse much beyond US$70? It is, after all, the ideal price as far as they are concerned - practically the highest you can charge while still making planned Canadian oil sands developments not-quite-viable, at least with regard to recent quoted build costs....