Goldman sharply raises oil price forecast

By Alex Lawler

LONDON (Reuters) - Goldman Sachs, the most active investment bank in energy markets, on Friday sharply raised its forecast for oil prices in the second half of this year, citing tight supply.

The bank expects U.S. crude to average $141 a barrel in the second half of 2008, up from a previous projection of $107, it said. Goldman also forecasts prices will rise further next year to average $148.

"Tight supply conditions continue to be the primary catalyst for higher crude prices," the bank said in a research note. "The near-term outlook for oil prices continues to be bullish."

The Goldman forecast helped send crude prices to a record high of $127.82 on Friday, analysts said. The 2009 estimate is the most bullish among more than 30 banks regularly polled by Reuters.

Goldman, one of the first to point to triple-digit oil more than two years ago -- a once unthinkable level -- earlier this month said oil could shoot up to $200 within the next two years.

Its note on Friday said that despite the advent of alternative sources such as biofuels, oil supply growth has slowed to 1 percent from about 1.8 percent in 2005 and less than the bank's forecast for 2008 world GDP growth of 3.8 percent.

"Given this imbalance, long-term oil prices will need to continue to rise," Goldman said.

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