Goldman upbeat on oil outlook despite economy woes

LONDON, Jan 30 (Reuters) - Worries over a slowdown in the United States and other major "advanced" economies could drive so-called speculators away from oil, but the market's supply/demand fundamentals remain supportive, investment bank Goldman Sachs said in a weekly research note.

"While concerns over economic growth will likely continue to create volatile swings in speculative positions and crude oil prices in the near term, current oil market fundamentals remain robust and continue to support our $95 a barrel average 2008 price forecast."

If investors focus instead on the broader global economy -- including China and India as well as the advanced economies of the OECD -- the speculative element in oil markets would decline more moderately, the bank said.

Goldman believes the most likely scenario will be somewhere between the two, supported by a positive fundamental supply/demand position.

Strong economic growth has historically tended to attract a high level of speculative flows into oil and a weak economic environment has tended to see investors retreat.

"The level of net speculative length in the oil market has declined...in the past two weeks, approaching the lows of last summer during the sell-off resulting from the turmoil in the U.S. credit markets," the bank said.

But despite such concerns over an economic slowdown, latest government data shows no signs that oil demand in the United States and China is faltering.

Goldman pointed to China's crude oil imports, for example, which were up 14 percent year on year in December and U.S. Department of Energy data that showed total oil demand remained more than 4 percent higher than year-ago levels. (Reporting by Jane Merriman; editing by James Jukwey)