Updated from 1:08 p.m. EST
Oil rallied Thursday, spurred on by surging gasoline prices and a Goldman Sachs research note that said a $100-per-barrel price isn't out of the realm of reason.
The May futures contract closed at $1.41 to $55.40 a barrel in Nymex electronic trading. Gasoline futures, which expire Thursday, spiked more than 5.5 cents to $1.653 a gallon, topping the record all-time high of $1.59 it reached last week.
Crude futures caught a bid after Goldman put out a note arguing oil is entering a bull run that could, in certain scenarios, take crude above $100 a barrel. The bank said those prices would eventually crimp global demand, but until then it predicted major upside for big oil producers.
"Oil markets may have entered the early stages of what we have referred to as a 'super spike' period -- a multiyear trading band of oil prices high enough to meaningfully reduce energy consumption and recreate a spare capacity cushion only after which will lower energy prices return," Goldman Sachs noted.
Goldman raised the upper end of its estimate of where oil might conceivably "spike" to $105 a barrel from $80 a barrel. Its general forecast of West Texas Intermediate crude prices moved to $50 in 2005 and $55 in 2006, up from $41 in 2005 and $40 in 2006, previously.
Since Goldman has a big commodities trading operation, a lot of investors wondered about the self-fulfilling aspect of Thursday's call, and if Goldman stood to profit from it.
Independent analysts who spoke to
were reluctant to ascribe a trading-based motive to the research, noting that Goldman is fairly unspecific about what could drive crude to its $105-a-barrel ceiling. Instead, they said, the call seemed more like a marketing ploy, attaching Goldman's name to a story -- oil -- that is increasingly the biggest on Wall Street.
"It's an ego thing," says Phil Flynn, senior market analyst at Alaron Trading. "Goldman is really just catching up with where prices ought to be, as most firms still have $40 a barrel price targets. Fifty-five dollars is a more realistic outlook, and $105 is not that outlandish in case of an event such as supply disruption."
Flynn said a high-hype quotient isn't unfathomable, given the current volatility of energy prices. "Energy is the place to be today, it's where investment opportunities lay and money is to be found. The fundamentals are very bullish," Flynn said.
Referring to the Goldman Sachs' note, energy economist Jim Williams at WTRG Economics, said $100 a barrel is "certainly a possibility." Market powers such as increasing global consumption, Chinese oil demand and dicey politics in Venezuela are critical influences that can cause price pressure, Williams said.
Another concern driving energy prices Thursday was plummeting gasoline stockpiles ahead of the peak driving season. Yesterday's Energy Department report showed a more-than-expected 2.9 million-barrel drop in gasoline reserves, raising fears that the U.S. is not refining enough crude to meet a surging demand for fuel.
Oil prices remain below the record highs two weeks ago, as the dollar has rallied and traders reassess supply levels. Energy Department data showed a larger-than-expected increase in crude inventories, which triggered a massive selloff that took crude below $53 a barrel for a good part of the session. Prices rebounded late in the day.
Shares of most major oil producers were higher Thursday.
gained 64 cents, or 1.08%, to $59.88;
increased 6 cents, or 0.1%, to $58.32;
( RD) rose 1 cent, or 0.02%, to $60.10;
rose 22 cent, or 0.35% to $62.52; and
increased $1.80, or 1.71%, to $107.23.
The Philadelphia Oil Service Sector Index, or OSX, has also moved up almost 5% today. The Amex Oil Index, or XOI, rose about 1.68%.
In stock news,
was raised to outperform by Rehan Rashid, an analyst at Friedman Billing Ramsey. Rashid expects 10% growth in production for the company in each of the next two years, as well as a 15% production growth in 2007. He also raised his target price to $87 from $80. Shares rose $3.16, or 4.51%, to $73.96.
Cal Dive International
( CDIS) rose after closing a $300 million private placement of convertible notes. The shares gained $2.53, or 5.88%, to $54.53. Another company,
, jumped after it priced 4.5 million shares at $27.50 each, pegging the total expected proceeds at about $121 million. Shares gained $1.16, or 4.27%, to $28.32.