Oil price will shrug off U.S. woes: Goldman

LONDON (Reuters) – Oil’s long-term supply constraints should make any fall in prices due to a recession in the United States only temporary, Giovanni Serio, an oil analyst at Goldman Sachs told Reuters.

Oil tumbled on Monday as investors took profits in financial markets unnerved by the bailout of U.S. investment bank Bear Stearns over the weekend.


The oil market had hit a string of record highs over the past week, taking it to $111.80 a barrel and had jumped about 16 percent since the start of this year partly due to the weak dollar, but also reflecting long-standing structural constraints on supply.

Investment bank Goldman Sachs said there was potential for a significant pull-back because of a U.S. slowdown, financial market gyrations and a seasonal increase in oil supplies due to the end of winter and oil refinery shut-downs for maintenance.

“The U.S. slowdown is already affecting oil demand and that is why we expect pressure on prices,” said Giovanni Serio, oil analyst at Goldman Sachs.

But he remained positive on oil long-term because of the market’s deeply-ingrained structural constraints that mean supply cannot easily rise to meet rapidly increasing demand from emerging countries like China and India.

“The driver is not demand, it’s supply,” he said, pointing to 20 years of underinvestment in new oil production.

Reuters