Oil to hit '$95 a barrel' as world economy improves

Goldman Sachs today predicted that oil prices would rise to $85-$95 a barrel this year as global economic growth accelerates.

Economic improvement in the US and Japan has helped prices rise from the low-$70 to low-$80 range since October, and a tighter supply-demand balance will draw Opec spare capacity back into the market, the bank said.

The US has reported positive year-on-year growth in industrial production for the first time since the start of the recession, while Japan's economy expanded at a 4.6 per cent annual rate in the fourth quarter, above expectations.

"We continue to expect that as the near-term fundamentals of the oil market continue to improve, strengthening timespreads will lift WTI crude oil prices into this $85-$95 per barrel range."

American crude for March delivery rose 23 cents to $80.04 a barrel today after hitting a six-week high of $80.51.

The Goldman report also said refining margins were likely to remain under pressure because of large increases in Asian capacity: "We expect that simple refining margins relative to WTI prices will come under pressure as Opec spare capacity enters the market in the second half of 2010 as the resulting downward pressure on heavy crudes should allow complex refiners to increase production at the expense of simple light crude refiners."