Goldman's Murti, super-spike predictor, sees oil tight again

Fri Oct 14, 2011 1:55pm EDT

* Analyst called 'super spike' to $150-$200/bbl in 2008

* Says prices need to rise to ration demand

* Sees 'huge draws' in inventories

NEW YORK, Oct 14 (Reuters) - The Goldman Sachs equity analyst who predicted oil prices would spike to $150-$200 a barrel three years ago said on Friday the market is showing 'stark similarities' to the start of the 2007-2008 bull run.

Arjun Murti, Goldman's top energy equities analyst in New York, said that falling inventories and disappointing supply growth had left the oil market "extremely tight" and it is likely prices will climb higher.

"The physical market suggests that the current environment for oil looks very similar to the 2007 bull market that led to demand rationing prices in the first half of 2008," Murti said in a note to clients that was coauthored with London-based analysts Michelle della Vigna and Henry Morris.

"Disappointing supply, decent demand, huge draws in inventories and limited spare capacity are all common factors. We are currently in the tightest physical market we have experienced since the end of 2007/beginning of 2008."

In 2005 Murti was one of the first analysts to predict oil prices would one day hit $100 a barrel, an almost unthinkable level at a time when prices averaged $57 a barrel for the year. He was proved right three years later.

The New Jersey native, who has described himself in the past as 'anti-oil', went on to make his 'super spike' $150-$200 a barrel call in May 2008, when prices were around $115.

Brent crude prices would eventually peak at $147.50 a barrel in July 2008, but he was stung by criticism after prices collapsed in the second half of that year.

In Friday's note, Murti stopped short of forecasting how high prices might rise.

Goldman Sachs' commodity research team, which forecasts prices for individual raw materials, sees Brent crude oil averaging $120 a barrel in 2012. Brent is on course to average more than $100 for the first time ever this year.

Some energy traders said Murti's bullish view was supporting a strong rally in Brent crude on Friday. Prices were up almost $3.50 at $114.50 by early afternoon in New York, and have climbed almost 15 percent since briefly dipping below $100 a barrel 10 days ago.

HOW TIGHT IS THE MARKET?

Murti said that inventories of oil in developed countries have fallen sharply in 2011, influenced by supply outages in Libya and buoyant demand.

"The latest inventory data from Europe, the U.S. and Japan suggests total inventories are now 31 million barrels below their five-year seasonal average, and in absolute terms crude inventories are back at their 2006 levels," Murti said, adding stocks would be even lower if it were not for the International Energy Agency's emergency fuel release over the summer.

"This reflects a global market in deficit despite Saudi producing the highest amount of crude since the 1980s and shows stark similarities to the 2007 bull market that led to demand rationing prices."

Murti, said that demand in the United States, the world's largest oil consumer, had not yet been curbed substantially by higher prices this year, suggesting they could have further to climb.

"We continue to believe the imbalances between global oil demand and supply will only be corrected by price incentivized demand destruction, likely driven at first by the United States," Murti said.

If prices keep rising he tipped Statoil, Bowleven , Occidental , Suncor , China National Offshore Oil Corp (CNOOC) and India's state-owned Oil and National Gas Corp (ONGC) as the energy companies most likely to outperform.

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