Another bull bites the bullet
Wednesday, September 17, 2008
Another commodity bull is having second thoughts about crude oil. Goldman Sachs analysts made big headlines this year when they predicted oil would rise in a “super spike” to $200 (U.S.) a barrel. Now, they cut their three-month target to $115 a barrel from $149 previously. They cut their six-month target to $125 from $142.
However, that's still pretty bullish, given where oil prices have gone in recent weeks. With oil trading at about $93 a barrel on Wednesday afternoon, the new targets still imply a 24 per cent rise by the end of the year and a 34 per cent rise at the end of the first quarter of 2009.
“We will stand by our bullish view on oil but just think it will now take longer to get to our previous price targets,” the analysts said in their report. “The supply side of the market still remains severely constrained.”
The analysts' revision comes as rising development costs in the Canadian oil sands are overshadowing commodity moves. UTS Energy Corp. announced on Wednesday that the cost of the Fort Hills project has surged to about $24-billion (Cdn.) – a stunning 50 per cent increase since the preliminary estimate in June, 2007 – raising alarms about feasibility.
UTS, which has a 20 per cent stake in the project, saw its shares wilt 40 per cent on Wednesday. Teck Cominco Ltd., which also has a 20 per cent stake, fell 3.3 per cent. Petro-Canada, which owns a 60 per cent stake, fell 4.4 per cent.
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