Wall Street critics have long blamed speculators for driving up the price of oil. Surprisingly, investment banking giant Goldman Sachs appears to agree. In fact, it has issued a warning that the price of oil has grown out of control due to excessive speculation. This has driven down the price of Brent crude oil for the past two days. David Sheppard from Reuters reports:
Goldman Sachs chief energy analyst David Greely said the recent run-up in prices, in which Brent rallied as much as 33 percent since the start of the year, looked overdone.
"While prices are back at levels of spring 2008, supply-demand fundamentals are significantly less tight," Greely said in an April 12 note emailed to clients.
"We believe that the market will experience a substantial correction toward our $105 a barrel near-term target for Brent crude oil in coming months," he stated.
On Monday prices peaked at $127 per barrel, but now they're already down to around to $120.63 at 2pm EST on Tuesday. Obviously, if Goldman is right, then prices still have much further to fall. To be sure, it would be great news for the economy if oil prices declined to more reasonable levels.
Read the full story at Reuters.