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Goldman says WTI can trade up to cash-cost ($25) short term. Brent to $65 by end of 2021.

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(edited)

What is cash costs.  With the current price crash and pending consolidation cash costs is important to understanding where contract price will be heading.

Here is a WSJ article that goes into the cash cost , and other costs that go into the pricing of a bbl of oil.  It's a bit dated , 2016.  A lot of costs have changed since then.,but the methods are the same. (The article ref Rystad , good fundamental analysis)

http://graphics.wsj.com/oil-barrel-breakdown/

As far as Goldman projecting $65 Brent on 2021 who knows.  Most of the oil analyst at the brokerage firms can't project the price next month much less 18 months out.  A weatherman's forecast can be correct half the time and still keep their job.  Some oil analyst are never right and keep their job.  Very little real fundamental analysis is done.  Many just parrot Saudi or OPEC talking points and get by.  Do you think in 2021 people will remember what Goldman projected for Brent ?

Ever follow the weekly analyst survey of U.S. crude inventory .  Every week it's either a "surprise" build or a "surprise" draw.

But the analyst guesses works.  Oil hasn't traded on fundamentals in years.  It trades on comments by the talking heads.  

I think the current events might change that.

For the first time we are finally getting real production cuts.  Either because of storage being full or those with the relatively stronger balance sheets refuse to sell at these prices.

During the 2008 Financial Crisis the price of oil settled at cash-cost of about $4O for a while (temp dipped/overshot to $26) . 

Todays Goldman cash WTI est of $25 sounds right.  That's the easy part.  What happens from there. More important what is the timing.  

"Goldman Tells Bulls to be Patient"

https://markets.businessinsider.com/commodities/news/oil-price-goldman-tells-bulls-be-patient-expects-stages-rally-2020-5-1029156037

Edited by BLA

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