Posted in: Opinion,
by Patrick DeHaan on Jul 27, 2010 11:59 AM
I ran across a story that Bloomberg picked up this morning about reliable old Goldman Sachs. If you're a frequent reader you know that I've already decided that anything they say publicly just reiterates their position in petroleum and tries to get investors to buy in to their theories which net them millions of dollars (while duping investors out of billions).
Bloomberg has Goldman Sachs as saying "Crude oil prices are significantly below the level warranted by fundamentals, offering hedging opportunities for this year and next, Goldman Sachs Group Inc. said."
In English, Goldman Sachs is saying that fundamentals are strong (high demand, lower supply, low spare capacity, etc.) when in fact,
Lately- as in the past few months- fundamentals point to a bearish picture more than a bullish picture in my opinion. Overall oil demand has remained subdued well below 2008 levels and supply continues to remain above average. Earlier this year, we also saw gasoline inventories at their second highest peak since the 90's- hardly painting a picture of high demand and low supply- two things that would merit higher prices. Since those two factors are relatively absent, is Goldman Sachs just blowing hot air?
Sure seems like it... but then again, they are the firm typically issues forecasts for rising crude prices no matter what the economic situation, perhaps playing the markets. Goldman may hold long positions, releasing news to attempt to manipulate people into thinking oil is a good buy. If we suddenly have many more investors getting in oil, it drives prices higher- something good for Goldman Sachs. A conflict of interest? I'd say so.
Well, don't take my word for it. Here are a few pictures showing the current amount of gasoline supply- as you see- remains above average. Oil supply- remains well above average. Do you think looking at these signals poor fundamentals? Hardly.