NEW YORK Goldman Sachs, widely seen as one of the most influential banks in commodities, said Brent crude oil prices could fall by $10 to $12 a barrel by the end of July after the International Energy Agency (IEA) announced a surprise release of 60 million barrels of oil from member countries.
"We estimate that a 60 million barrel release by the end of July has the potential to reduce our three-month Brent crude oil price target by $10-$12 a barrel, to $105-$107 a barrel," Goldman's energy team, led by David Greely in New York, said in a note to clients.
"We would expect the release to have less of an impact on prices further out the curve, as the oil would be absorbed to meet current demand. Net, we would expect that the potential impact on Brent crude oil prices in 2012 to be closer to $5-$7 a barrel on average."
The analyst team stopped short of an official price revision, saying they wanted to know whether the release would be through a direct sale of crude and oil products from IEA member countries or whether they would operate an exchange.
"We would expect that if the emergency release is implemented through an exchange program there will be less of an impact on crude oil prices for 2012 and beyond than if it is implemented through a direct sale, which would leave more uncertainty over when the government would choose to refill the SPR (U.S. Strategic Petroleum Reserve)," the note said.
At 1:40 p.m. EDT Brent crude oil prices were already down $5.86 at $108.35 a barrel, but were well above an earlier intraday low of $105.72.
Prices were largely unchanged from before the publication of the note.
GOLDMAN IN COMMODITIES
The investment bank rocked commodity markets in April when the long-term price bull suddenly turned cautious on the outlook, saying speculators had pushed prices ahead of fundamentals as Brent crested a post-2008 peak near $125 a barrel.
Goldman was one of the first banks to predict $100 oil last decade, in March 2005 when prices were closer to $50 a barrel, and traders frequently say the bank's recommendation can have an outsize influence on the market.
In late May, the bank said the large correction in prices that month provided a good buying opportunity, and raised its year-end Brent forecast to $120 a barrel, reaffirming its bullish medium-term view.
Its current three-month forecast is $117 a barrel and its forecast for 2012 is $130 a barrel.
The bank has remained long-term bullish of oil and said the 2008 peak of more than $147 a barrel could be surpassed in the coming years.
Greely told Reuters on Wednesday that while a large production increase from Saudi Arabia could limit the size of any global stock draw in the second half of this year, they expected spare production capacity in OPEC to be "effectively exhausted" by rising demand in 2012.
(Reporting by David Sheppard; Editing by Lisa Shumaker)