Wednesday, May 25, 2011

2012 forecast of Brent oil prices increased to $140

Gasoline rose along with crude oil after Goldman Sachs Group Inc. and Morgan Stanley boosted their oil price forecasts.Futures advanced as Morgan Stanley increased its Brent oil 2011 outlook by 20 percent to $120 a barrel and Goldman estimated prices would hit $130. Prices also gained as the dollar fell 0.3 percent against the euro as of 12:31 p.m. in New York, adding to the investment appeal of commodities.

"Goldman is calling for crude to go back up and the dollar is starting to show signs of weakness," said Phil Flynn, vice president of research at PFGBest in Chicago.

Gasoline for June delivery rose 3.19 cents, or 1.1 percent, to $2.97 a gallon at 1:06 p.m. on the New York Mercantile Exchange. Futures rose as much as 3 percent.Crude oil for July delivery increased 98 cents, or 1 percent, to $98.68 a barrel on the exchange.

Gasoline also gained as U.S. inventories were 16 percent below a year earlier, according to Energy Department data. This weekend's three-day Memorial Day holiday period is the traditional kickoff of the summer driving season.

"You have fairly tight gasoline supplies and the dollar turned down today," said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Inventory Report Tomorrow

The department is scheduled to report last week's inventories at 10:30 a.m. tomorrow in Washington. Gasoline stockpiles rose 400,000 barrels, according to the median estimate of 14 analysts in a survey by Bloomberg News.

Supplies of distillate, including heating oil and diesel, increased 50,000 barrels, according to the survey's median estimate.

U.S. refining margins have been strong, largely due to the discount for benchmark West Texas Intermediate versus Brent oil that is likely to narrow, analysts at Goldman Sachs led by Jeffrey Currie said in a report today.

"We maintain that refining margins will remain under pressure owing to the large increase in refining capacity in Asia," Currie said. "For 2012 and beyond, we believe that crude will be the bottleneck in the system, rather than refining."

Goldman raised its end-of-2012 forecast of Brent oil prices to $140 a barrel from $120.Regular retail gasoline dropped 1.5 cents to $3.828 a gallon, AAA said on its website.

Heating oil for June delivery added 4.19 cents, or 1.5 percent, to $2.889 a gallon on the exchange.

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