Oil prices once again dominated the trading landscape, this time fuelled in part by the well-known investment banking and securities firm Goldman Sachs (the company is also a large player in the energy markets). Goldman Sachs issued a report that was widely discussed on Wall Street today. The report suggests that oil is in the early stages of a major bull run which might take the commodity to a level as high as $105 per barrel - in what is called a ‘super spike’.

However, economists commented that only a major disruption of oil supplies (from Iran, Iraq, or Saudi Arabia) could presently bring about such a drastic move – the scenario would necessitate major geopolitical turmoil and is considered highly unlikely. Still, the disturbing report was too significant to ignore and seems to have had an impact today, as crude oil futures advanced to a close above the $55 level.

The demand side for oil products continues to be strong. For instance, the demand for gasoline in the U.S. has increased by 2% from last year – despite record-setting crude oil prices that are almost 50% above the levels seen a year ago. This situation is associated with some concern over what will happen during the upcoming ‘driving season’. More important than the Goldman Sachs report itself is the troubling realization that persistently high oil prices will have long-term negative effects on the economy, which is currently showing continued strength.

There is some debate whether the much anticipated job creation report to be released tomorrow (it is expected to show that roughly 220,000 new jobs were created in March) will move the market to any considerable extent. Some market strategists think the market has already priced in this data and surmise that the major indexes will attempt to extend the recent advance. There is hope that the new quarter will bring “fresh money” to the market, although many analysts doubt whether the indexes will be able to put together more than a brief bounce from oversold levels.

© HGH Associated Press

News Archive (from 1/1/2005 until 3/31/2005)