Oil to rise to $85-$95 range in 2010

23. Feb 2010

SINGAPORE - Goldman Sachs said on Monday that benchmark oil prices will rise to $85-$95 a barrel this year as global economic growth accelerates, up from the low-$70 to low-$80 range since October last year.

Positive economic news from the United States and Japan has boosted prices already this year, the U.S.-based investment bank said in a report, and a tighter supply-demand balance will draw OPEC spare capacity back into the market, it added. The United States has reported positive year-on-year growth in industrial production for the first time since the start of the recession, while Japan's economy expanded at a 4.6 annual rate in fourth-quarter 2009, above expectations.

"We continue to expect that as the near-term fundamentals of the oil market continue to improve, strengthening timespreads will lift WTI crude oil prices into this $85-$95 per barrel range."

U.S. crude for March delivery rose 23 cents to $80.04 a barrel at 0713 GMT, after hitting a six-week high of $80.51.

The Goldman report said refining margins however are likely to remain under pressure because of large increases in Asian capacity.

"Further, we expect that simple refining margins relative to WTI prices will come under pressure as OPEC spare capacity enters the market in the second half of 2010 as the resulting downward pressure on heavy crudes should allow complex refiners to increase production at the expense of simple light crude refiners."
[Reuters]