Published On: Thu, Jan 29th, 2015

Goldman Sachs’ Gary Cohn Not Alone in Expecting Continued Oil Freefall

Gary Cohn of Goldman Sachs

When Gary Cohn of Goldman Sachs predicted oil, which has shed 60% since June 2014, could fall to the $30 level, many were aghast as if to say in unison; we knew the oil situation was bad but not that bad. Of course, this isn’t bad at all for consumers, who can lock in low prices by making huge purchases. But is oil really headed that low? Experts may not have a target as low as Cohn’s but few are saying the bottom is coming soon.

A massive increase in U.S. production and falling demand are to blame for the drop in oil prices, and probably won’t be remedied soon. In November, OPEC did not reduce production target, and American inventories are expected to have risen to 401.9 million barrels. Tariq Zahir, a fund manager at Tyche Capital Advisors, told the Irish Examiner, “Any rally (in oil) will be short-lived. I won’t be surprised to see prices in the 30s in a few weeks.”

Jeff Currie, Goldman Sachs’ chief commodity analyst released a research note that demand for oil would continue to slow in emerging markets, including China, and the price should stay low for a while. While prices may eventually rebound, Currie said the current drop is “the most startling and far reaching development” since the financial crisis of 2008.

OPEC’s secretary general, Abdullah al-Badri thinks oil prices have bottomed between $45 and $55 a barrel, and if OPEC will cut production, it could go back to $200. It is a long, long way to the Tipperary price target of $200, and al-Badri says that could happen only if OPEC cuts production. So Nu, OPEc, what are you waiting for?

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