AFP reported that oil prices will likely rise to about USD 130 per barrel in the next 12 months as demand in emerging markets such as China and India make up for weak developed world growth.
Goldman Sachs said that despite concerns about the US economy and eurozone sovereign debt which has hit crude prices due to an expected fall in demand, the Wall Street giant forecast commodity prices to remain buoyant.
At the same time it tipped gold a safe haven in times of economic uncertainty to cost USD 1,860 an ounce in a year much lower than the record high of USD 1,921.15 it hit last month. The large emerging economies of the BRICS Brazil, Russia India, China and South Africa are forecast to grow 7.7% this year and 7.9% in 2012.
Goldman Sachs said that by contrast, advanced economies are projected to expand only 1.7% this year and 2.1% next year. Brent crude which is traded in London is expected to hit USD 130 per barrel in the next year from current levels around USD 112.
West Texas Intermediate light sweet crude oil, traded on the New York Mercantile Exchange is forecast to reach USD 126.50 per barrel over the same period from current USD 88. Both contracts touched all time highs of above USD 147 per barrel in July 2008 before the onset of a global financial crisis.
Ms Allison Nathan senior commodities economist at Goldman Sachs said that "Clearly there is very little growth anticipated to come from the US, EU and the developed markets. But we expect quite robust emerging market demand growth with China still anticipated to grow at 9.2% next year and overall the BRICS countries close to 8%. The spread between WTI crude and Brent should narrow in the future but it was still unclear when the gap will close.”
Goldman Sachs said that the high inventory level at the US oil hub in Cushing, Oklahoma has led to WTI trading at a significant discount compared with other light sweet crudes such as Brent. Transportation pipelines must be upgraded to improve delivery.
While we expect that alternative transportation capacity such as rail, truck and barge shipments will expand rapidly over the coming months we believe that WTI will remain volatile and prone to dislocations in the future until the pipeline infrastructure is improved.
( Source: www.steelguru.com )