Goldman closes out long positions

Goldman Says `Take Profits' After Crude Hits Record
By Mathew Carr and Margot Habiby
Oct. 30 (Bloomberg)

Goldman Sachs Group Inc., the bank that said in July oil may reach $95 a barrel, told clients it was ``time to take profits'' after crude rose to a record $93.80 in New York yesterday.

``We are now more cautious on the near-term upside potential for oil prices,'' analysts including Jeffrey Currie in London said in the bank's Energy Weekly today. ``We are not trying to call a top here, just take profits.''

Goldman said it was closing its long positions in New York oil futures. Oil has gained 51 percent this year as hedge funds and other large speculators increased bets on rising prices. Net-long positions in New York crude futures in the week ended Aug. 3 jumped to the highest in more than a decade.

Goldman predicted in March 2005 that oil would enter a ``super spike'' period, fueled by rising demand, and could reach $105 a barrel in the next several years.

Crude oil for December delivery fell $3.15, or 3.4 percent, to settle at $90.38 a barrel on the New York Mercantile Exchange. The price for March delivery was at $87.99 a barrel and at $82.92 for December next year.

``The downside risks we have embedded in our end of first quarter 2008 oil price target of $80 a barrel are beginning to gain momentum,'' Goldman said in the report. ``These include increasing exports, a slowing U.S. economy, an adequate level of heating oil inventories.''

Cold Weather Factor

Goldman's recommendation ``might be a bit early,'' especially if colder weather boosts demand during the next two months, said Francisco Blanch, a London-based analyst at Merrill Lynch & Co. Blanch predicts oil will average $80 a barrel for the three months through December, and that prices are more likely to reach $100 soon than $60.

Twenty-one, or 49 percent, of 43 analysts surveyed by Bloomberg News last week said oil prices will fall through Nov. 2, the least bearish response since Sept. 7. Eighteen, or 42 percent, said prices will rise, the most bullish response since the week ended July 6. Four forecast little change. The previous week, 69 percent of respondents said oil would fall.

``I think you'll get some more oil into the U.S.,'' Blanch said today by phone. ``It will take another few months to get it up and running.''

An increase in crude supplies will partly come from the Greater Plutonio oil field in Angola and the Genghis Khan field in the U.S. Gulf of Mexico, which both started this month and will likely ramp up production during the next few weeks, Goldman said.

Freight Rates

``The strength in freight rates from West Africa to the U.S. Gulf Coast suggests that U.S. refineries may be preparing to receive more of the new Angolan low-sulfur medium grade Plutonio,'' Goldman said.

Lehman Brothers Holdings Inc. forecast a ``sharp price fall'' by late winter in a report released today. The Lehman analysts, led by New York-based Edward Morse, said there's a 50 percent chance that Nymex futures will exceed $96.50 a barrel before the December contract expires.

Lehman raised its fourth-quarter forecast for Brent oil by $10 to $85 and said it expects Nymex oil to average about $2.50 a barrel higher than that.

``Our view is that we don't think prices are sustainable where they are,'' Michael Waldron, an energy markets research analyst in New York and one of the authors of the Lehman report, said in a telephone interview earlier today.

OPEC Objectives

OPEC, whose members produce more than 40 percent of the world's oil, said current crude prices don't reflect the group's objectives.

The Organization of Petroleum Exporting Countries has a ``duty'' to supply the world with oil at stable prices, Mohamed al-Hamli, the group's president, said today at an oil conference in London. If the market needs more oil, OPEC will supply it using spare capacity of 3.5 million barrels a day, he said.

OPEC ``recognizes it has a responsibility'' to ensure ``stable'' prices for producers and consumers, he said. Al-Hamli said he doesn't expect oil to reach $100 a barrel in the near future.