Then the Canadian $ should go up with it…

commodities up....

tsx up......

Goldman sees 'swift and violent rebound' for oil

Grant Smith, Bloomberg Published: Monday, January 19, 2009

David McNew/Getty ImagesThere is scope for a “new bull market” in oil.

Goldman Sachs Group Inc. commodity analyst Jeffrey Currie said he expects a "swift and violent rebound" in energy prices in the second half of the year.

Oil prices may have reached their lowest point already, after falling to US$32.40 in mid-December, and are expected to rise to US$65 by the end of this year, the analyst said. There is scope for a "new bull market" in oil, Mr. Currie said.

World oil demand is likely to fall by about 1.6 million barrels a day this year, the Goldman analyst said Monday at a conference in London. That's bigger than the reduction expected by the International Energy Agency, which last week forecast a decrease of about 500,000 barrels a day, or 0.6 %, this year.

A recent tactic of using supertankers to store crude oil to take advantage of higher prices later this year is "difficult" to profit from and is "near the end of this process" anyway, the Goldman analyst said.

New York crude futures for delivery in December, trading near US$56 a barrel, currently cost some US$15 a barrel more than March futures, a market situation known as contango, where prices are higher for later delivery.

The contango is likely to flatten as supply cuts by OPEC and other producers take effect, reducing the availability of oil for immediate delivery, Currie said.

The Organization of Petroleum Exporting Countries started another round of supply cutbacks at the start of this month. The group's compliance with its overall efforts to cut production will probably peak at 75%, or a reduction of about 3 million barrels a day out of an announced aim of 4.2 million barrels a day, Goldman Sachs said.

In several steps, 10 OPEC members have pledged to reduce production to 24.845 million barrels a day, a cut of 4.2 million barrels a day from September's level.

Morgan Stanley hired an oil tanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell PLC in trying to profit from the contango, two shipbrokers said in reports earlier Monday.

Bloomberg.com