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research_2_ - August 19, 2008 Commodities: Energy Goldman...

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Unformatted text preview: August 19, 2008 Commodities: Energy Goldman Sachs Commodities Research 1 August 19, 2008 Commodities Energy Oil fundamentals, not the USD, are expected to drive oil prices Oil market fundamentals remain the key driver of oil prices The recent sharp improvement in the US dollar and Goldman Sachs currency economists shift in views towards the general sustainability of this strength have raised the question of the impact of such shifts on oil prices, given the recent strong correlation between the US dollar and oil prices. Although the recent correlation in dollar and oil prices is clear, it is important to emphasize that each of these assets are driven by multiple, varying factors, consistent with a lack of correlation between the assets over the longer term. Put differently, there is more to oil than the US dollar and vice versa. Although concerns over non-US economic growth likely contributed both to the recent oil price sell-off as well as the dollar strengthening and was a key driver of our economists recent shift in currency views - we maintain that fundamental factors that are largely unaffected by a slowdown in mature economies and/or by US dollar movements will likely continue to drive oil prices. Specifically, we expect declining trend oil supply growth and supportive emerging markets oil demand growth to continue to offset demand weakness in OECD as it has done so far this year. We reiterate that fundamentals in the oil market suggest a return to a rising oil price environment and maintain our year-end WTI price forecast of $149/bbl. Giovanni Serio +44(20)7774-2535 | giovanni.serio@gs.com Goldman Sachs International Allison Nathan (212) 357-7504 | allison.nathan@gs.com Goldman, Sachs & Co. Jeffrey Currie +44(20)7774-6112 | jeffrey.currie@gs.com Goldman Sachs International David Greely (212) 902-2850 | david.greely@gs.com Goldman, Sachs & Co. The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For important disclosures, see the text preceding the disclosures or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not required to take the NASD/NYSE analyst exam. The Goldman Sachs Group, Inc. Global Investment Research August 19, 2008 Commodities: Energy Goldman Sachs Commodities Research 2 Oil fundamentals, not the USD, are expected to drive oil prices The recent sharp improvement in the US dollar and Goldman Sachs currency economists shift in views towards the general sustainability of this strength have raised the question of the impact of such shifts on oil prices, given the recent strong correlation between the US dollar and oil prices. Although the recent correlation in dollar and oil prices is clear, it is important to emphasize that each of these assets are driven by multiple, varying factors,...
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This note was uploaded on 03/11/2010 for the course CEVE 322 taught by Professor Segner during the Spring '10 term at Rice.

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research_2_ - August 19, 2008 Commodities: Energy Goldman...

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