ProShares Ultra Short Oil & Gas ETF (DUG)

[rayrohn]

Goldman play the oil market like they did the subprime???

140 dollar oil will hurt a lot of people in the states and should kill the oil market here also...

Goldman Raises Second-Half WTI Oil Forecast to $141 (Update2)
http://www.bloomberg.com/apps/news?pid=20601072&sid=aBgHsyAv_E9Q&refer=energy

By Stephen Voss and Alexander Kwiatkowski

May 16 (Bloomberg) -- Goldman Sachs Group Inc., the world's biggest securities firm by market value, raised its New York crude-oil price forecast for the second half of this year by 32 percent, citing supply constraints.

Goldman now forecasts West Texas Intermediate, the benchmark crude grade traded in New York, will average $141 a barrel in the second half of the year, up from its previous forecast of $107. Prices will rise further in 2009, averaging $148 a barrel, the bank said.

``Supply constraints and a lack of scaleable substitutes are set to continue driving the long end of the oil curve higher,'' Goldman analysts including Peter Oppenheimer and Jeffrey Currie in London wrote in a report dated today.

U.S. President George W. Bush will today ask Saudi Arabia to increase oil production to help lower prices and promote economic growth, White House spokeswoman Dana Perino said. Banks including UBS AG and Sanford C. Bernstein have raised their 2008 forecasts while Goldman Sachs analyst Arjun Murti has said oil may rise to between $150 and $200 within two years.

The trend in the growth of oil supply has fallen to 1 percent per annum, compared with global economic growth of about 3.8 percent, today's Goldman report said. ``Given this imbalance, long-term oil prices will need to rise.''

Third Quarter

The front-month West Texas Intermediate futures contract on the New York Mercantile Exchange has averaged $104.30 a barrel so far this year. In the third quarter, Goldman Sachs forecasts the price will rise to $135.30 and $145.60 in the fourth quarter.

Europe's Brent crude futures contract should rise to $133.80 a barrel in the third quarter of the year and $144.10 in the final period, according to the bank. The front-month Brent contract on the ICE Futures Europe exchange has averaged $102.52 a barrel this year.

The near-term oil market is being driven by ``long-dated'' prices, or the price of oil for delivery 5 years forward, Goldman said. While an increase in U.S. stockpiles and declining demand growth due to the global economic slowdown is creating ``near-term fundamental weakness,'' this is not causing lower prices, according to the bank.

``We do not expect these softer fundamentals to translate into spot price weakness given the strength in long-term prices,'' according to the report. ``We expect the bullish structural market to dominate the bearish cyclical weakness.''

Supply Constraints

Goldman said it was unlikely prices would eventually rise enough to justify large scale investment in alternative sources of fuel, thereby offsetting the discrepancy between supply and demand, because of resource protectionism which constrains supply growth.

Instead, an increase in long-term oil prices is required to suppress demand growth and bring it in line with supply growth, Goldman said. It forecasts the long-date oil price to rise 14 percent to $148 a barrel by early next year.

``Long-term oil prices will need to continue to rise to bring trend oil demand growth in line with trend supply growth,'' the bank said. ``Eventually a price will be reached which incentivizes significant conservation, new technologies and political solutions which will eventually cap the price rises.''

WTI crude for June delivery rose to an intra-day record of $127.43 a barrel in after-hours trading on the New York Mercantile Exchange today.

To contact the reporters on this story: Stephen Voss in London at [e-mail] Kwiatkowski in London at [e-mail]
Last Updated: May 16, 2008 08:41 EDT