Goldman Sachs Sees Increasing Risk of Rising 2012 Oil Prices
January 17, 2012, 9:06 AM ESTBy Ramsey Al-Rikabi
(Updates with comments in second paragraph.)
Jan. 13 (Bloomberg) -- The risk of oil prices rising in 2012 is increasing amid the threat of supply disruptions and shrinking spare capacity in the Organization of Petroleum Exporting Countries, according to Goldman Sachs Group Inc.
“We continue to see a strong case for crude oil fundamentals tightening further in 2012,” the bank said in a research note today. “The risks to the upside in oil are substantially greater given the stronger fundamentals and recent events surrounding Iran and Nigeria.”
Nigerian labor unions said they will continue a strike that threatens oil exports from Africa’s top producer because no agreement has been reached yet with President Goodluck Jonathan on restoring fuel subsidies. Iran has threatened to respond to international sanctions aimed at cutting its oil revenue by shutting the Strait of Hormuz, a transit route for a fifth of the world’s crude.
The current tension between the West and Iran is bearish for oil prices as U.S. sanctions prompt refiners to cut back on Iranian purchases while Saudi Arabia maintains production levels to prepare for an EU embargo, creating a surplus of crude, according to Goldman. The downward pressure on prices will dissipate as China soaks up the Iranian supply and Saudi Arabian output is consumed by refiners, the bank said.
“With Saudi producing close to 10 million barrels a day, OPEC will be operating with a very thin layer of spare capacity, making the oil market much more vulnerable to additional disruptions, with supplies from Nigeria being a particular concern,” according to the report.
Crude for February delivery increased as much as $1.01 to $100.11 a barrel in electronic trading on the New York Mercantile Exchange today.
Planned European Union sanctions on Iran may be postponed by six months to allow countries such as Greece, Italy and Spain to find alternative petroleum supplies, according to an EU official with knowledge of the talks.
--Editors: Christian Schmollinger, Alexander Kwiatkowski
To contact the reporter on this story: Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
