Oil is above $57 and it can touch $105

The Oil markets have entered the “super-spike” period that could see 1970’s-style price surges as high as $105 a barrel, investment bank Goldman Sachs said in a research report. Goldman’s Global Investment Research note also raised the bank’s 2005 and 2006 New York Mercantile Exchange crude price forecasts to $50 and $55 respectively, from $41 and $40.

These forecasts sit at the top of the table of predictions from 25 analysts, consultants and government bodies surveyed by Reuters. “We believe oil markets may have entered the early stages of what we have referred to as a “super spike” period-a multi-year trading band of oil prices high enough to meaningfully reduce energy consumption and recreate a spare capacity cushion only after which will lower energy prices return,” Goldman’s analysts wrote. Analysts said the latest runup in oil prices suggests there is new money coming into the market from hedge funds and other speculators, as well as from commercial players, such as airlines and fuel distributors, that are trying to lock in prices now out of fear that the upward trend may continue.

Another factor appeared to be an investment bank report that said strong demand and tight supplies could cause a “super spike” that will push oil prices above $100 a barrel. Oil traders said there was no real news yesterday, though a combination of the Goldman Sachs forecast and concern over the adequacy of US stocks ahead of the start of the summer driving season were seen as affecting sentiment.

Data on the US economy yesterday showed inflationary pressure building in manufacturing and services, with the likelihood of more to come if oil prices continue to rise. Some dealers expressed scepticism at the Goldman study, noting that the recent surge in oil supply was leading to a big rise in gasoline inventories in the US. The oil cartel Opec has agreed to increase production to cope with heavy demand from the US and China, and any slowdown in the world’s biggest economy would affect the global demand for energy and send prices tumbling back below $50. Meanwhile, the use of oil in cars and factories in China, India and other developing countries is surging, putting the world on a collision course with a rapidly shrinking cushion of oil supplies.

Most oil-producing nations are pumping as much as they can, and the cushion of excess supply among Organization of the Petroleum Exporting Countries producers — primarily Saudi Arabia — is estimated at less than 1 million barrels a day in a world that consumes 84 million barrels of oil a day. The dicey outlook led Goldman Sachs, a major energy trader and Wall Street investment bank, this week to forecast spikes in oil prices to more than $100 a barrel over the next several years as consumers bump up against global limits on oil supplies.