Floor Trader: Why Goldman Is Wrong (Again) On $20 Oil Prediction
Tim Anderson was recently a guest on #PreMarket Prep, a daily trading idea radio show hosted by Joel Elconin and Dennis Dick.
Crude oil prices are down substantially over the past 52 weeks. The United States Oil Fund LP (NYSE: USO) is down 57 percent, while the VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Excess (NYSE: UWTI) lost 96 percent.
NYSE Floor Trader and TJM Investments Managing Director Tim Anderson said that he thinks prices will stabilize at twice that ($40) this year.
Further, Anderson suggested that there may be opportunities in some oil services names, including large names like Whiting Petroleum Corp (NYSE: WLL) and potentially Chevron Corporation (NYSE: CVX).
In response to Goldman Sachs' forecast that oil prices could reach $20, Anderson said that a WTI Crude Oil price that based at $40 was much more likely. He even pointed to Goldman's 2008 forecast for $200 oil as an indication that the tide had swung the other way.
When Anderson looked at the price action last week, he noted that there was a bid at times. That led him to believe that the price declines may be slowing this year, although $40 oil is still 10 percent below current price. Moving into the future, Anderson warned that there were still a lot of events that "could throw a forecast like that out of whack."
On oil sector stocks, Anderson said that there are a number of names that could be interesting. He suggested that moving into the end of the year, mutual fund managers may be selling oil names in order to leave them off quarterly reports of holdings. That could leave opportunities for traders willing to bargain shop.
One name Anderson mentioned was Whiting Petroleum, a stock that has declined nearly 52 percent year-to-date. In the past month, the stock declined 17 percent – a factor that could play into Anderson's selling thesis.
Anderson said that the price of oil could get to $65 or $70 in the next 18 to 24 months. However, the price is "not going back to $100," he said.
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