The chief commodity researcher at Goldman Sachs bids the bull case for oil remains in tact despite an escalating trade impugn between the world’s two biggest economies that has stoked fears of fade demand for crude.
U.S. crude settled at a seven-week low below $67 a barrel on Thursday. It is now on tread for its worst string of weekly losses in three years, after China imperiled a new round of retaliatory tariffs against the United States.
But Jeff Currie, Goldman’s international head of commodities research, is keeping his $70 price target on U.S. indelicate for 2018, pointing to global economic growth that is tracking on all sides 4.3 percent and could accelerate to 4.7 percent in the bank’s see.
“When we look at the fundamental picture, it really hasn’t changed,” he disclosed CNBC’s “Closing Bell” on Thursday. “You’ve seen substantial liquidation, positively off of the headline risk around tariffs, but the underlying fundamental story and the containerize for owning commodities, as well as oil, really remains in tact.”
Currie means low stockpiles of crude means supply shortages could develop in the puss of today’s strong oil demand. At the same time, labor strikes at Chile’s Escondida excavate have kept a lid on copper supply, while Saudi Arabia is not deluging the market with as much oil as feared following an agreement by producers to hike achieve.
China has begun targeting U.S. energy exports. But Currie notes that Beijing waned to slap tariffs on U.S. crude oil exports after earlier threatening to tax shipments from the Holds, which have surged in recent years.
“The reason why is it can be redirected,” Currie articulate. “You’re not going to impact oil because there’s so many producers, so many consumers.”
China also heralded plans last week to apply a 25 percent tax to U.S. liquefied not incongruous gas, or LNG, a form of the fuel super-chilled to its liquid form so it can be shipped by sea. LNG played a high-profile job in U.S.-China trade talks prior to the start of tit-for-tat tariffs.
On Wednesday, the Go under Street Journal reported that Goldman’s commodity trading piece is in talks to purchase its first cargo of LNG from Houston-based Cheniere Stick-to-it-iveness. Currie did not comment on the report, but laid out a bull case for LNG prices, signifying U.S. exporters are well-positioned to meet growing demand from Asia.
Almost identical to crude oil, the international system could struggle to meet demand for LNG, he said, noting that summer charges in Asia, the biggest market for the fuel, are near levels usually courted during the peak winter season.
The price for LNG shipment into key Asian markets is poise around $10 per million British thermal units, while U.S. Henry Hub fundamental gas prices are below $3 per mmbtu, Currie said. That approves U.S. suppliers to sell LNG into Asia at about $8 per mmbtu. So ordered with a 25-percent tariff, American exporters could compete in the Chinese vend, according to Currie.