Goldman sees oil surging to $85 by year end

LONDON (Reuters) - Goldman Sachs (GS.N) on Monday forecast U.S. oil prices will surge to $85 by the end of the year, and said crude could climb as high as $90 due to tight supplies.

Their estimate was $13 higher than its previous forecast, and came after oil's rally to a record high of $80.36 a barrel on Friday.

Goldman said OPEC's decision last week to boost output by 500,000 barrels per day was not enough to mute bullish sentiment.

"We believe that this will be too little, too late ... and now expect inventories to draw to critical levels this winter," it said in a report.

Goldman forecast prices to rise as high as $95 by the end of next year. It estimated 2008 prices to average $85 a barrel.