BLBG: Crude Oil Climbs as Goldman Forecasts Rally to $85 by Year End
June 4 (Bloomberg) -- Crude oil rose after Goldman Sachs Group Inc. said prices may reach $85 by the end of the year and extend gains in 2010 as demand recovers and supplies shrink.
The New York-based bank raised its year-end forecast from $65 a barrel and withdrew its prediction that prices will dip prior to a rally. Yesterday, crude declined after a U.S. government report showed fuel demand fell the most since January last week as rising prices and the recession hurt consumers.
“Partly today’s gains are due to the higher prediction from Goldman Sachs,” said Eugen Weinberg, an analyst with Commerzbank AG in Frankfurt. “There’s a lot of optimism priced in. But demand is in a very fragile position, and I expect there will be considerable correction.”
Crude oil for July delivery gained as much as $1.26, or 1.9 percent, to $67.38 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $67.19 as of 11:54 a.m. London time. Oil reached a seven-month high of $69.05 on June 2.
“As the financial crisis eases, an energy shortage lies ahead,” Goldman analysts Jeffrey Currie in London and David Greely in New York wrote in a research report e-mailed today. The bank set a 12-month price target of $90 a barrel, up from $70, and introduced a forecast of $95 for the end of 2010.
Fuel demand in the U.S., the world’s largest energy user, fell 900,000 barrels to 17.7 million barrels a day last week, the biggest drop since Jan. 9, the government report showed. Gasoline consumption slipped 518,000 barrels to 9.02 million, the biggest decline since January 2005.
Crude Inventories
Crude inventories climbed 2.9 million barrels to 366 million in the week ended May 29, according to the Energy Department. The gain occurred as imports jumped 9.9 percent and refineries increased operating rates to the highest in six months. Fuel demand fell to the lowest since May 1999.
The Energy Department report was forecast to show that crude-oil stockpiles lost 1.5 million barrels, according to the median of 15 estimates from analysts surveyed by Bloomberg News.
Refineries operated at 86.3 percent of capacity, up 1.2 percentage points from the previous week and the highest since the week ended Dec. 5, the report showed.
Brent crude for July delivery was at $67.17 a barrel, up $1.29, on London’s ICE Futures Europe exchange at 11:56 a.m. local time. It dropped $2.29, or 3.4 percent, to end yesterday’s session at $65.88, the biggest decline since April 20.
