Oil surges to $67 on Goldman forecast

Reuters | Thu, 04 Jun 2009 15:39
[miningmx.com] -- Oil rose to around $67 a barrel on Thursday helped higher by a Goldman Sachs report forecasting higher prices, while a stronger dollar weighed on other commodities from gold to base metals.

Some commodities may have moved up too fast, analysts said, with oil rising 30 percent in May and hitting a seven-month high of $69.05 a barrel on Tuesday. London copper rallied to a 7-1/2 month high above $5,000 this week.

"For the better or for the worse, a switch in the Goldman price forecast rarely does not have a price influence and we will need to take it as a market input for the next few days," said Olivier Jakob, oil analyst at Petromatrix.

Oil hit an intraday high of $67.38 a barrel by 1205 GMT, having fallen 3.5 percent the previous day. It pared gains after the dollar rose following the European Central Bank's decision to keep interest rates unchanged.

Goldman Sachs raised its end of 2009 oil price forecast to $85 from $65 and introduced a new end of 2010 forecast of $95, the U.S. bank said in a research note.

Prices fell back on Wednesday after the U.S. Energy Information Administration reported U.S. crude inventories rose 2.9 million barrels, against expectations for a decline of 1.4 million barrels in a Reuters poll.

Other commodities sometimes track oil because the energy markets can reflect the state of the global economy.

The Reuters-Jefferies CRB index of 19 commodity futures, which includes everything from soybeans to cattle to crude oil, was down 0.3 percent at 252.52 on Thursday -- after hitting a 6-1/2-month high this week.

Gold was firmer in Europe earlier on Thursday but briefly turned negative after the ECB decision.

Weakness in the dollar, which boosts interest in gold as an alternative asset and makes it cheaper for holders of other currencies, sent the metal to a high of $970.45 earlier in the day. Spot gold was bid at $962.80 an ounce at 1205 GMT, against $962.15 an ounce late in New York on Wednesday. It touched a session low of $960.70 after the decision.

The ECB held interest rates at 1 percent and the Bank of England earlier on Thursday left rates unchanged at a record low of 0.5 percent for the third month running.

Gold struck a three month high at $989.80 on June 3 -- around 1 percent below an 11-month high above $1,000 hit in February.

Inflation worries and the dollar's weakness have supported a bullish view on gold, while bears said short-term funds were driving up the market so any gains would not last long. stretched losses to a third day on Thursday, on the firmer dollar and after data showed half a million U.S. private jobs losses in May.

"Over the next few months there is a risk that data is not seen supporting a V-shaped recovery view," said David Moore, commodities strategist at Commonwealth Bank of Australia.

"And in that case the market becomes disappointed about the economic outlook and potential for recovery for metals demand and prices fall back for a while."