Jim Armitage: Goldman has its own reasons for gushing about the price of oil

General rule of thumb in the City: if Goldman Sachs tells you to buy buy buy, sell like hell. The reason, investors will tell you, is simple. Chances are that Goldman, somewhere along the line, is taking the opposite bet, or at least facilitating someone else to. Either that, or it'll be making money out of that suggested punt in other ways.

So it is that Goldman is one of the most vocally optimistic in its public pronouncements on the global economy. This view has a knock-on effect on such important stuff as global commodities prices. But, when Goldman says, as it did just before Christmas, that metals like copper and zinc are a great, long-term bet as the economy bounces back, it doesn't point out that, as one of the world's biggest owners of metals warehouses, it benefits rather nicely from a boom.

So, when Goldman tells us that oil is a raging buy for 2012, perhaps we should also remember that it's also one of the world's biggest oil brokers and holds massive "long only" – ie "raging buy" positions in the black stuff. It denies any conflict of interest in its advice to clients and its own trading positions.

When it comes to oil, Goldman is the biggest bull on the street. It predicts the price of a barrel of Brent crude will shoot up to $130 this year from its current levels of around $110. As ever, it cites the rosy future for the global economy in 2012.

Its view was given a fillip yesterday when crude jumped more than $3 a barrel – nearly $4 at one stage in the afternoon. Analysts cited Iran's current spat with Uncle Sam as the reason. With Iran threatening to close the Straits of Hormuz to oil shipment traffic, there's little wonder the price of oil is on the up.

Others pointed to the surprisingly healthy economic figures coming out of the US and China. Perhaps Goldman is right to be donning its rose-tinted Ray-Bans after all as it gazes into its economic crystal ball.

I'd advise more scepticism. And a quick perusal of the excellent work from Capital Economics. Its oil expert is Julian Jessop. Last time he looked, he had no multi-billion dollar bets on rising crude prices to plug. Rather, he studies what's going on in Europe and tells his clients to sell. All the way down to $85 and then possibly further.

"You only have to look at the threats to world growth from the eurozone to realise there's a very big risk of the oil price tumbling," Mr Jessop explains. "If the eurozone struggles as it clearly could, that will have major knock-on effects on growth in China and the rest of the world."

As for the geopolitical threats in the Middle East, he is fairly dismissive. "Iran is all just rhetoric. It is inconceivable that the West or Israel would want to pick a fight with Iran when the world economy is so weak. They've not even got the will to impose economic sanctions, let alone take military action. And the last thing Iran wants to do is close the straits – even if it was militarily strong enough, which it isn't. Closing the straits would hit its oil exports as well, remember, and it really doesn't want that."

Goldman's perennially bullish stance on the oil price has largely been due to its claim that there are serious supply shortages. But that's a matter of some doubt too. It was right about this in 2011 thanks to the surprise – which it didn't predict – of the Arab Spring and Libyan conflict. But the fall of Colonel Gadaffi means supplies should resume this year, while the Arab Spring countries are already pumping again.

Don't get me wrong. Only a fool would refuse to countenance an oil price shock emerging from the Middle East, particularly Iran. As Bill Farren-Price, the chief executive of Petroleum Policy Intelligence points out: "There is always a danger at times like this that someone on the ground will make some awful misjudgement with huge consequences."

But, in the round, I'd be betting against the Goldman view. Oil will spend 2012 bumping around at its current levels or below.

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