Goldman Sachs: “The Market is Trying to Rebalance the Future … “

In this Zerohedge post Goldman Sachs explains exactly what I’ve been talking about for some time now. They call it a “supply driven bear market”…

Yep. That is what it is when the Saudis realize that the price they get for their oil today is the best they will ever get…

Here are som interesting quotes from the report. Only one piece of information missing. Why is it happening and why is it happening now? You know the answer…

The New Oil Order: Finding a new equilibrium

… We believe the oil market is experiencing a cost re-basement which makes determining when the market is oversold extremely difficult, as the price at which rebalancing occurs is now a moving target to the downside. …

… Slowing the rebalancing and creating further downside risk is a very strong consensus view that this pull back is temporary …

… It is precisely this strong view for a rebound in prices and the behavior it creates, that not only suggests that oil prices can go lower for longer, but also that the new normal is far lower than we thought …

… Although the spot price is only at $58/bbl, the 5-year forward oil price is already lower today at $69/bbl than it was in December 2008 ($70.50/bbl) when spot WTI prices fell to $33/bbl. …

… Now it is all working in reverse as the market searches for a new equilibrium – lower oil prices, weaker commodity currencies, lower material and oil service costs and increased efficiency are all reinforcing to the downside. 

… it is in OPEC’s interest to maximize revenue through volumes, 

(by Jeffrey R. Currie, global head of Commodities
Research in the Global Investment
Research (GIR) Division at Goldman Sachs, New York
)

This is what the black swan look like today. Russell 2000 vs. Oil since 2011… I believe this graph shows clearly that there was a fundamntal change in the market at the time when the Lugano Report was published. Even more so, than the oil price per se, wich compared to stock has been trading within range for several years up to more or less exactly that point. Enjoy! This is good news!

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One thought on “Goldman Sachs: “The Market is Trying to Rebalance the Future … “

  1. Pingback: Welt im Wandel: Der E-Cat und der Ölpreis

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