Goldman Sachs now sees oil surging higher in 2011, 2012

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Michael Babad
Globe and Mail Update
Last updated Tuesday, May. 24, 2011 9:15AM EDT


Goldman boosts oil forecast
Goldman Sachs Group Inc., which only last month sparked a plunge in oil prices (CL-FT99.151.451.48%) that launched a rout in the commodities markets, now says crude will be higher than it forecast earlier.

Preparing for higher interest rates Goldman now says investors should buy oil and some other commodities.

Goldman raised its 12-month price forecast for Brent crude to $130 a barrel from $107, and increased the end-2012 forecast to $140 from $120, citing global economic growth and tight OPEC spare capacity, our Market Blog reports. Goldman also recommended buying December 2012 ICE Brent crude oil futures.

“We expect that the ongoing loss of Libyan crude oil production and disappointing non-OPEC production will continue to tighten the oil market,” Goldman said. “It's only a matter of time until inventories and OPEC spare capacity will become effectively exhausted, requiring higher oil prices to restrain demand.”

Morgan Stanley also raised its 2011 Brent crude forecast to $120 a barrel, from $100 previously, and lifted its 2012 target to $130, from $105.