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Goldman: Oil Risk Below $20

Goldman: Oil Risk Below $20Goldman: Oil Risk Below $20

Oil could drop below $20 a barrel as the search for a level that brings supply and demand back into balance makes prices even more volatile, Goldman Sachs Group Inc. predicted. "The capacity to store crude has been exhausted in some places," said Jeff Currie, Goldman’s head of commodities research, Bloomberg reported.  Currie noted that prices may need to drop low enough to halt crude output that can no longer be stockpiled. “Once you breach storage capacity, prices have to spike below cash costs because you have to shut in production almost immediately,” he said.  Volatility will surge and he “wouldn’t be surprised if this market goes into the tens”. West Texas Intermediate, the US crude benchmark, traded near $30 a barrel on Tuesday, having slumped to a 12-year low near $26 on Jan. 20, as rising OPEC output and resilient US shale production intensifies a global glut.  Currie said prices will swing between $20 and $40 a barrel over the next six to nine months while the rebalancing process plays out.

 

Financialtribune.com