Oil rises to near $99 as Goldman boosts forecasts
Originally published May 24, 2011 at 12:12 a.m., updated May 24, 2011 at 5:15 a.m.
SINGAPORE (AP) — Oil prices rose to near $99 a barrel Tuesday in Asia after Goldman Sachs raised it crude forecasts on concern the shutdown of Libyan output will drain spare OPEC supplies.
Benchmark oil for July delivery was up $1.04 to $98.74 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. In London, Brent crude for July delivery was up $1.12 to $111.22 a barrel on the ICE Futures exchange.
Goldman said it expects Brent will rise to $140 by the end of next year, higher than the investment bank’s previous forecast of $120. A civil conflict in Libya has shut down almost all the country’s 1.6 million barrels a day of oil production, and Goldman expects that loss to global supply will eventually push prices higher.
“We expect that the ongoing loss of Libyan crude oil production and disappointing non-OPEC production will continue to tighten the oil market,” Goldman said in a report. “It’s only a matter of time until inventories and OPEC spare capacity will become effectively exhausted, requiring higher oil prices to restrain demand.”
Other analysts are more pessimistic about global crude demand. Slowing economic growth in the U.S., Europe and China will likely hurt oil consumption and push oil prices down in the second half, said Richard Soultanian of NUS Consulting, who expects crude to average $88 in the fourth quarter.
The benchmark contract lost $2.40 to settle at $97.70 on Monday as the dollar strengthened amid growing investor concern about Europe’s debt crisis. Crude also fell on fears China’s economic expansion is slowing after Platts, the energy information arm of McGraw-Hill Cos., reported that growth in crude consumption fell in April.
Oil has dropped from a 30-month high near $115 a barrel on May 2.
“The risk of a significant pullback in both the commodities and equities markets is uncomfortably high,” Soultanian said. “The decline in the past weeks is the canary in the coal mine indicating that energy markets will undergo a more sustained and consistent decline in the coming months.”
In other Nymex trading in June contracts, heating oil rose 3.5 cents to $2.88 a gallon and gasoline gained 3.2 cents to $2.97 a gallon. Natural gas futures added 1.5 cents to $4.36 per 1,000 cubic feet.