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Goldman Downgrades Oil Sector With Lower Oil Outlook

  • Year to date, the Energy Select Sector SPDR (NYSE: XLE) has declined 19.2 percent.
  • Goldman Sachs lowered its price target on 2016 WTI Crude Oil from $57 to $45 and simultaneously cut its outlook for midstream energy coverage from Attractive to Neutral.
  • Goldman's Theodore Durbin said that the firm lowered its target prices for pipeline and MLP names by 16 percent, on average.

In response to an updated oil outlook from the Goldman Commodities team that saw their target price for WTI crude oil drop from $57 to $45 in 2016, Theodore Durbin lowered the firm's outlook for oil names. Durbin forecasted that U.S. oil supply would decline in 2016, while natural gas supply will remain relatively flat. In the equity space, that creates a "heightened risk that organic growth capex will roll over in 2016/2017."

However, Durbin said that there are "still opportunities despite challenging outlook." This means that "investors need to be selective," Durbin added. For what to look for, Durbin noted that the firm prefers "stocks with assets leveraged to demand-pull (vs. supply-push)." That criteria includes Kinder Morgan Inc (NYSE: KMI).

Alongside this note, Durbin upgraded Spectra Energy Corp. (NYSE: SE) to a Buy, while downgrading Enable Midstream Partners LP (NYSE: ENBL), Memorial Production Partners LP (NASDAQ: MEMP), Oneok Partners LP (NYSE: OKS) and Plains All American Pipeline, L.P. (NYSE: PAA) to Sell. The price target on Spectra Energy was moved to $34, 18 percent upside. These ratings changes, Durbin said, "reflect an even more defensive stance."

Latest Ratings for KMI

May 2021Wells FargoDowngradesEqual-WeightUnderweight
Mar 2021Morgan StanleyMaintainsEqual-Weight
Mar 2021BernsteinDowngradesOutperformMarket Perform

View More Analyst Ratings for KMI
View the Latest Analyst Ratings


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Posted-In: Crude Oil Goldman Sachs Spectra Energy Corp.Upgrades Downgrades Commodities Markets Analyst Ratings

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