When oil was $74 a barrel in July, Goldman Sachs (GS) analyst Jeffrey Currie made the controversial prediction that prices would soon spike to above $90. After his prophecy was fulfilled, he reversed course on Oct. 30, warning that traders had gotten ahead of themselves and should take profits. His advice contributed to a nearly $3.15 per barrel drop that day, to $90.38. Although prices have bounced around since then, Currie's instincts appear to have been on the mark again.
Over the past year, the 41-year-old American, based in London, has become one of the most influential people in the oil market. Currie consistently bucked the crowd. In 2005, when some oil companies though prices would settle at $40 per barrel, he raised eyebrows by forecasting a long-term price of $60. "People were highly skeptical," he says.
A former teacher of economics at the University of Chicago, Currie joined Goldman in 1996. He still likes to play the professor, illustrating impromptu lectures with hand drawings of supply and demand curves. It was his study of the oil futures curve this summer that helped convince him that a price spike was likely. In June, the curve shifted into a pattern called backwardation, meaning near-term prices were much higher than those several years away. To Currie this meant buyers were scrambling to get their hands on supplies, a condition that would force prices even higher.
Despite his recent caution, Currie remains a long-term bull on oil and other commodities. He forecasts that U.S. light sweet crude will be $85 a barrel at yearend and $95 in 12 months. The native Oregonian argues that petroleum prices rise and fall in long cycles of investment and payback. The world is paying the price for low investment in oil production and refining throughout most of the 1980s and '90s, Currie argues. "It is the revenge of the Old Economy," he says.
By Stanley Reed