Oil Shortages to Reappear in 2011, Goldman Sachs Says

Jan. 18 (Bloomberg) -- Goldman Sachs Group Inc. said that shortages will reappear in the crude oil market as supply fails to keep pace with a recovery in demand.

Global oil consumption will return to levels seen before the financial crisis by the third quarter of this year, Goldman analyst Jeffrey Currie said in a presentation in London today. At the same time, projects to bring new oil to consumers are still lagging as a result of the credit crunch, he said.

“By 2011, the market is back to capacity constraints,” Currie said in slides shown with the presentation. “The financial crisis created a collapse in company returns which has significantly interrupted the investment phase.”

Crude oil futures traded around $78 a barrel in New York today, having recovered 78 percent last year with the passing of the biggest economic shock since World War II.

Investment into new oil capacity is being held up because “political impediments on the flow of capital are still very large,” Currie said at the conference.

Foreign companies have difficulties exploring for oil in Saudi Arabia and Iran, the holders of the two largest reserves, because of the state’s control of production in the former and economic sanctions against the latter.

“It’s as good as it’s going to get right now in terms of supply growth,” Currie said.

Last month Goldman predicted that crude would average $90 a barrel in 2010 and $110 per barrel in 2011. That makes Goldman’s outlook for this year joint-highest among 38 analyst estimates compiled by Bloomberg.