I always enjoy it when Goldman Sachs crystal ball loses its much-vaunted mystical powers, as it regularlydoes.
Earlier this year, itforecast that oil would fall to $40 a barrel over the next couple of quarters.At time of writing, West Texas Intermediate is trading at more than $61 a barrel, while Brent Crude is pushing $70.
The resurgent oil price has taken many by surprise but there was always somedegree of inevitability about it.
Depressed prices had the predictable impact of closing down the more expensive US wildcat shale drillers and hitting oil exploration investment generally, which was bound toknocksupply at some point.
Although US commercial crude inventories remain close to an 80-year high, they have thinned lately, falling by 3.9 billion barrels in the week to 1 May.
That wasthe first drop since January, and double the anticipated fall.
The recent fall in the dollar was also to blame, making oil cheaper for those buying in foreign currencies, and stoking demand.
Saudi Arabias decision to increase prices for its European customers in June, while holding them flat in Asia, fuelled the upwards price trend.
Saudi needs to keep some of its oil for itself, to fuel peak electricity demand in its baking hot summer.And with the US driving season almost upon us, many investors would expect recent price rises to accelerate further.
Both producers have been hit hard by last years halving of the oil price, with Q1 revenuesdown 57% and 56% respectively.
Rising production, falling capex and profitabledownstream operations all offset some of the damage, but what both stocks really need now is a continuing rebound in the oil price.
Further progress could prove tricky, however. Stockpiles are still close to record highs. Saudi continues to pump well above its quota. Iran will be keen to get its oil to market, once sanctions eased.
And $70 oil will bring back the shale drillers.
Some analysts claim crude could fall to $20 a barrel, as it comes into line with gas prices. They may be right. Orlike Goldman Sachs, they may be wrong.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.