Goldman Sachs warns of $105 a barrel oil

Goldman Sachs warns of $105 a barrel oil

Mar 31, 2005 -- NEW YORK (AFP) - World oil prices surged on a wave of speculative buying sparked in part by a Goldman Sachs study that predicted levels of more than 100 dollars a barrel, traders said.

New York's main contract, light sweet crude for delivery in May, soared 1.41 dollar to 55.40 dollars per barrel in early deals, off a peak of 56.10 dollars.

In London, the price of Brent North Sea crude oil for delivery in May rocketed 2.20 dollars to 54.29 dollars.

"Goldman Sachs research brought up concerns about crude oil, saying that the market is headed for an abrupt upward trend because of the tightness of supply and demand," PFC Energy analyst Seth Kleinman said.

The investment bank warned of a possible "super-spike" in oil prices above 100 dollars a barrel.

"We believe oil prices have entered the early stages of a super-spike period," said analyst Arjun Murti, who raised his price range to 50-105 dollars a barrel from 50-80 dollars.

The higher price range was foreseen to last several years because of "strength in oil demand and economic growth, especially in the United States and China," Murti said.

London-based Societe Generale analyst Deborah White said: "We seem to be going through another wave of fund buying ... not only by the hedge funds but also by the pension funds.

"Commodities are so hot right now. What has set off the wave of buying today is the Goldman Sachs report that talked about a super spike," she added.

Oil prices were also supported Thursday by supply worries ahead of a likely strike by energy workers in Nigeria, Africa's biggest exporter of crude.

Nigerian oil unions said Wednesday that it would take a miracle to avert a nationwide strike as talks with government and energy majors on working conditions broke down. A three-day "warning strike" was due to begin April 11.

As the world's ninth-biggest oil producer, Nigeria accounts for daily exports of about 2.5 million barrels.

The strike "is potentially a bullish factor," said Graham Sharp, director of energy trading at Trafigura.

Fears that US refineries would not be able to process sufficient crude products to meet demand were also evident, analysts said.

"There are reasonable worries about whether the refining capacity is high enough ... to meet demand in the fourth quarter," White added.

Meanwhile the US Department of Energy said Wednesday in its latest oil inventory report that crude stockpiles had risen by 5.4 million barrels to 314.7 million in the week to March 25.

That was much stronger than the 2.0 million barrel gain expected by traders, and came after a rise the previous week of 4.0 million.

It was the biggest weekly increase in crude stocks since last October, with inventories now at their highest level since July 2002.

The drawdown in US gasoline supplies was meanwhile twice as big as expected by financial markets, with the government department reporting a drop of 2.9 million barrels to 214.4 million.