Goldman Sachs: Oil at $150-$200/bbl Possible in Next 6 to 24 Months

LONDON, May 6, 2008 (Dow Jones Newswires)

An oil price "super-spike" to $150-$200 a barrel is increasingly likely within the next six to 24 months, Goldman Sachs says.

"We believe the current energy crisis may be coming to a head, as a lack of adequate supply growth is becoming apparent and resulting in needed demand rationing in the OECD areas in particular the United States," Goldman Sachs analysts said in a research note Monday.

Goldman also raised its 2008 spot crude oil price forecasts, pegging West Texas Intermediate crude at $108 a barrel from a previous $96 a barrel, and Brent crude at $108 a barrel from $95 a barrel.

However, "predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty," the analysts said.

Goldman analysts made waves nearly three years ago when a team led by Arjun Murti, head of Goldman's energy research team, put forward a theory that oil prices were in the midst of a "super-spike" that could lift oil prices as high as a then-unheard of $105 a barrel.

In March, the group's prediction was borne out as front-month above $105 for the first time ever.

"We believe we may be in the early stages of having the end game of our 'super-spike' thesis play out, with crude oil prices having risen over $50 a barrel since the U.S. economic crisis began last summer - a remarkable move and one that we think is fundamentally supported by tight global supply/demand balances," the analysts said in Monday's report.

On the supply side, spare production capacity from the Organization of Petroleum Exporting Countries would continue to remain tight, with exports likely to be hampered by lackluster supply growth and sharply higher domestic demand, Goldman said. Meanwhile, non-OPEC crude production would also struggle to grow, particularly in Russia and Mexico.

Cost inflation and restrictions on foreign investment in many exporting countries would further limit oil supply growth.

On the demand side, a downturn in U.S. and Organization for Economic Cooperation and Development countries' consumption would be outpaced by strong demand growth in non-OECD countries, keeping oil market fundamentals tight, the analysts said.

LONDON, May 6, 2008 (Dow Jones Newswires)