Goldman $50-105

WEDNESDAY, MARCH 30, 06:04PM
ENERGY: SUPER SPIKE PERIOD MAY BE UPON US - SECTOR A BUY 

Goldman Sachs

AUTHORS:
Arjun N. Murti, Brian Singer, CFA, Luis Ahn

TICKERS:
AHC, AHC, XTO, XOM, WGR, VLO, UPL, UGP, UCL, TSO, TLM, THX, SUN, SU, STR, SKE, PZE, PXD, PPP, PCZ, PCO, PBR, OXY, NFX, NBL, MUR, MRO, KWK, KMG, FTO, FST, EOG, ECA, EAC, DVN, CVX, COP, COG, BR, BBG, ASH, APC, APA 

SYNOPSIS:
We believe oil markets may have entered the early stages of what we have referred to as a "super spike" period-a multi-year trading band of oil prices high enough to meaningfully reduce energy consumption and recreate a spare capacity cushion only after which will lower energy prices return. Resilient demand has caused us to revise up our super-spike range to $50-$105 per bbl up from $50-$80 per bbl previously. We see as much as 80% total return upside to super-spike-adjusted peak values and are comfortable recommending that investors add to positions in the sector at current prices, on a pull-back, or even after rallies. Top picks remain XOM, AHC, BBG, DVN, ECA MUR, NFX, PXD, PCO, STR, and SU (all OP/A). The key risk to our Attractive coverage view would be a sharp slowdown in economic growth in China and other emerging Asian economies.