Goldman Sachs: Oil Will Be At $45 In October And $50 By Year End

When oil prices came crashing down last year, many expected the production to follow suit. However, instead of dropping, oil production has been on a gradual rise and  according to Jeff Currie, Goldman Sachs Global Head of Commodities Research, that’s the reason to be negative on oil.

Currie was on CNBC post the OPEC meeting on Friday to discuss the outlook for oil going forward.

The Outlook

“I definitely think we have seen an improvement in demand for oil and in fact the bulls out there, that’s the core of their case for wanting to be bullish oil,” Currie said. “But offsetting that as we look at U.S. production, it’s still a line going straight up despite the fact we have seen a sharp drop in investment as well as in drilling.”

He continued, “You look at the low cost producers in OPEC, as we saw today again making large scale investments. In fact, you look at their production also going straight up…core OPEC production is at an all time high. Now, the one offset to this is what’s happening into non-OPEC, ex-U.S. and I think that’s what is really interesting.”

Price Target

Currie was asked about Goldman’s price target on oil going forward. He replied, “October we have it at $45, end of the year $50 and I am going to qualify. There are several factors going on here, one is the supply and demand for the molecules of energy…that’s a supply and demand of the excess demand we are seeing and the increased supply coming out of the OPEC.”

“But the other imbalance in the market is in capital, investment. We have too much capital in this market and that’s really the core of our negative view is to actually rebalance these capital market,” Currie concluded.