Goldman Sachs raised its oil price forecast for the end of 2009 to $85 a barrel from $65, anticipating dwindling supply and rising demand this year and next. Its forecast also put prices at $95 by the end of 2010, led by economic recovery in China. Influenced by these predictions, US light crude rose $2.39 to $68.51, while Brent was up $2.52 to $68.40, sparking fears of a further increase in prices at the petrol pump.  The Goldman Sachs research note, by Jeffrey Currie in London and David Greely in New York, said that the recent rally in US crude was likely to be the first stage in a sustained oil price rally.

The bank’s forecast of recovery in economic activity centres on China and other emerging market countries outside the rich West. Goldman Sachs expects Chinese oil demand to decline by 115,000 barrels per day in 2009, but to grow by 343,000 barrels in 2010.

It has ruled out a strong rebound in US oil demand over the next 12 months, as the pace of American economic activity is expected to remain low. Demand in the US is down 7.7 per cent year-on-year and Goldman Sachs expects that it will decline by 980,000 barrels per day in 2009 and by a further 60,000 in 2010.

Key to the anticipated recovery in the oil price will be the willingness of the production cartel Opec, in particular Saudi Arabia, to keep down production and draw inventories back to ten-year average levels, as non-Opec production continues to decline. Goldman Sachs warned that constraints on storage capacity remained a risk.

However, John Hall, an independent energy analyst, accused Goldman Sachs, one of the world’s largest oil traders, of scaremongering. He said that last December the bank had slashed its forecast for crude oil prices to just $45 a barrel for 2009, in a sharp U-turn from its prediction of $200 made just months earlier in May 2008.

Oil prices peaked at $147 a barrel in July 2008 and then fell sharply to less than $35 in December, as the rapidly deepening global economic downturn reduced demand for energy.

Mr Hall said: “Goldman’s numbers are all over the place. You need to consider the fact that the world is awash with oil on land and sea. And if the recession is really over, tell that to General Motors and LDV.”

Referring to Goldman Sachs’ forecast of a spike to $95 by the end of 2010, he asked: “Who would pay those prices? I don’t think that the Chinese would go that far.”

Mr Hall said he expected a correction in the oil price in the not too distant future: “It could hover where it is now and then come down.”

Last week Opec held production levels, saying that weak demand was “likely to remain for some time”.

Luke Bosdet, a spokesman for the AA, which represents 13 million motorists in the UK, said that at 100.6p per litre, prices at the petrol pump were already 10p up on March, adding £5 to the cost of a full tank.

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