Following its admission yesterday that it is now buying oil by telling clients to sell Brent to $105-107 a monther after advising anyone who cares Brent was on its way to $130, today we learn that Goldman is actively dumping its prop, pardon, there we go again, flow, FLOW, inventory of oil equities to idiots, pardon, clients. As to how dropping crude prices and thus collapsing profit margins is beneficial for energy producers, that is one we will long be scratching our heads over.
From Arjun Murti:
Potential SPR release consistent with expectation of tight oil markets: We recommend buying the dip in oil equities.
There is no change to our Attractive coverage view for the integrated oils sector following news on June 23 that the International Energy Agency (IEA) was calling for a 60 million barrel inventory release from strategic petroleum reserves (SPRs) held by member countries. While we recognize that the potential release of SPR-held oil into commercial markets could weigh on oil prices in the near term (e.g., Brent oil prices fell $5/bbl on June 23), we believe the release is consistent with the bullish underlying fundamentals we have expected, including the following points.
We continue to believe effective OPEC spare capacity is limited, a point reinforced by the IEA’s comment that the SPR release is in part needed to meet summer oil demand—a remarkable admission, in our view.
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