Around The Barrel – Crude Oil and Gasoline Inventories Outlook


[quote=”ThePitBoss” post=13724]Crude Futures Fall as Goldman Sachs research note sees correction in #oil price -15-20% rally moved ahead of fundamentals

Over $40/bbl incentivizes supply to return

Risks to downside increased substantially as surplus inventory overhang still exists[/quote]

“With oil now above $40/bbl, supplies will be incentivized to return, but we believe the risks to the downside have increased substantially and are now looking for a 15-20% correction which may already be underway after Monday’s modest sell-off,” Goldman Sachs’ commodities research team led by Jeffrey Currie wrote in an analyst note on Tuesday.

“Despite the rally, we have been hesitant to recommend a long position this early in the cycle for several reasons,” the analysts wrote.

Goldman also describes the commodities rally as having gotten “ahead of fundamentals” with metals the only exception, and noted that returns on commodity indexes are still well behind spot price growth — and you can’t invest in spot commodity rates. That disparity is exemplified by the fact that fund inflows from retail investors since the start of April “have generated a -20% return despite a 95% rally in spot WTI prices.”