Oil prices could reach $105 per barrel, up from a previous $80 estimate, according to Goldman's research note.
"We believe the sector has as much as 80 percent total return potential upside to super-spike-adjusted peak values that correspond to a scenario that assumes a 100 percent probability of a super spike," he said.
The strength in oil demand and economic growth, especially in the United States and China, following a year of $40-$50 per barrel WTI oil has surprised us... The reason for this adjustment in view is that persistent high prices are improving the financial position of key oil exporting countries and could serve to keep potential revolution at bay," said analyst Arjun Murti.
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This is one analyst's opinion from a well-respected firm. This is not guaranteed to happen.
There is a book available called Manias and other Speculation Bubbles or something like that. I keep meaning to get it, but haven't yet. A friend in the business read it and he described some of the other manias that have gripped the world. It sounded very interesting.
Oil is becoming the hot topic in investment circles. After the the internet bubble popped in 1999, investors started moving to real estate. Now that the idea of a real estate bubble is starting to move through economic and market circles, it appears that speculators may be moving to oil as the next hot market. The lack of spectacular return in the equity markets over the last 5 years exacerbated the need for a strong market somewhere.
The underlying fundamentals are driving this speculation. During recent history (1970s onward) there were really only two large markets for oil -- Europe and the US. And Europe's high taxation of gasoline made the US the primary consumer of oil between the two economies.
Now that has changed with the far east -- especially China and India -- emerging as the growing economies of the future. Not only are their respective economies doing well, but both have large populations. This compounds the growth of their increased demand for oil.
The middle market -- where companies convert oil to gasoline and other byproducts -- is where the squeeze is occurring. The Department of Energy reported that US refineries are operating near capacity -- 90%. In additioin, refineries are expensive operations to build and take a long-time to build. Therefore, this problem can't be eliminated in the short-term.
In addition, oil is found in politically unstable regions (how's that for devine irony?). Throughout most market commentaries are remarks from traders that all a real spike needs is an attack on a refinery or a pipeline to send the market into a spike.