Goldman Sachs: Crude Oil Headed To $130 A Barrel In Next 12 Months

While crude oil is hovering just above $89 as I write this, one prominent investment banking and securities firm predicts prices are headed higher over the next year. From Agence France-Presse earlier today:

Oil prices will likely rise to about $130 a barrel in the next 12 months as demand in emerging markets such as China and India make up for weak developed world growth, Goldman Sachs said Thursday…

Brent crude, which is traded in London, is expected to hit $130 a barrel in the next year, from current levels around $112, the bank said.

West Texas Intermediate (WTI) light sweet crude oil, traded on the New York Mercantile Exchange, is forecast to reach $126.50 a barrel over the same period from current $88.

The AFP highlighted Goldman’s forecast for a significant disparity in growth among the developed and developing economies. From the article:

The large emerging economies of the BRICS — Brazil, Russia, India, China and South Africa — are forecast to grow 7.7 percent this year and 7.9 percent in 2012.

By contrast, advanced economies are projected to expand only 1.7 percent this year and 2.1 percent next year, Goldman Sachs said.

At the end of last year, Goldman Sachs predicted the price of WTI light sweet crude oil would reach $100 by the middle of the year, and $105 by the end of 2011. WTI crude reached $101.95 by the second week of June before pulling back.

Will their end-of-the-year forecast also be realized? If so, what effect will energy prices at this level have on the stumbling U.S. recovery?

Source:

“Goldman Sachs tips oil to hit $130 in 12 months.” Agence France-Presse. 15 Sep. 2011. (http://www.google.com/hostednews/afp/article/ALeqM5gQoL8dSpwvRmfU0tqNDVBx1tfQTA?
docId=CNG.845572e84348f2e5c01e7818573012ea.11). 15 Sep. 2011.