Oppenheimer issued a note Thursday arguing that oil is hunting for a “new normal” price tag about $65 to $75 a barrel.
But on the way to making its point, the firm also took a shot at Goldman Sachs’ history of finding calls on the value of oil incorrect.
On Thursday, Oppenheimer wrote (emphasis ours):
We dismiss the $20 oil situation, as we dismissed the $200 oil view in 2008 — both came from the same source. We think oil rates will stay reduced for longer, until the objectives behind the collapse are met, and we don’t see this happening any time quickly. We think the market place is nonetheless looking for the new typical, which is not $50 and is not $one hundred either, but a lot more probably in the $65-$75 range.
That “very same source” is Goldman Sachs.
Earlier this month, oil analysts at Goldman Sachs said that in a worst-case situation, oil rates could be headed to $20 a barrel as the market place flushes out oversupply from OPEC and US suppliers who kept pumping oil regardless of a a lot more than 50% crash in rates in the last year.
The 2008 get in touch with Oppenheimer refers to is the now-infamous assertion by Goldman that oil would rocket up to $200 a barrel as part of what was then referred to as the “demand shock.” Recall that back in the middle of the final decade the large thought about oil was that we’d reached “peak oil” and have been doomed to run out of oil faster than the globe was prepared for.
Under this thought, oil prices had been rising and would attain a new, permanently higher plateau.
But US shale activity in the last few years has turned this thesis on its head as US output surged.
EIA
And whilst oil, of course, is nevertheless a scarce resource, fears about peak oil have been headed off.
As for its broader point Thursday, Oppenheimer thinks OPEC, the 12-member oil cartel led by Saudi Arabia, which has most seriously felt the squeeze from reduce oil prices, probably overplayed its hand by dismissing the US shale revolution.
Oppenheimer notes that shale production from the US has boosted worldwide production by about 4 million barrels per day, or about the combined output of Kuwait and the United Arab Emirates.
Eventually, the firm thinks OPEC’s economies will be forced to diversify, live inside their indicates, and embrace a “new normal” for the oil industry.
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