Goldman Sachs commodity strategist Jeff Currie sees a potential for oil price to drop below $20 a barrel if storage capacity is breached.
“The $20 is based upon what we call cash cost, meaning that once you breach storage capacity, prices have to spike below cash cost because you’ve got to shut production in almost immediately,” he told a TV channel.
“I wouldn’t be surprised (if) this market goes into the teens. But we do know that when we got to that $26-28 range we started… But we do know that when we got to that $26-28 range we started to see action. We started to see price volatility turn into fundamental volatility for the first time,” Mr Currie added.
Breaching storage capacity is a local phenomenon and is not a global phenomenon. Mr Currie sees no chance of systemic risk, adding that many risk-sharing arrangements are in place across markets and around the world. — Reuters
