Analyst predicts oil prices to reach up to $200 a barrel

A contrary report says oil prices are as likely to drop as they are to rise.

NEW YORK (AP) — A Goldman Sachs analyst predicts that oil prices could reach $150 to $200 a barrel over the next 6 months to two years, but said that how far prices could climb still “remains a major uncertainty.”

“We believe the current energy crisis may be coming to a head, as the lack of adequate supply growth is becoming apparent,” analyst Arjun N. Murti wrote in a client note.

Oil for June delivery hit a record $122 a barrel Tuesday in electronic trading on the New York Mercantile Exchange.

Meanwhile, the government on Tuesday again raised its short-term price forecasts for crude oil and gasoline — trends that are expected to tamp down demand.

The Energy Department predicts average monthly gasoline prices should peak at $3.73 a gallon in June, an increase of 13 cents from last month’s estimate. Regular-grade gasoline is expected to average $3.52 a gallon in 2008, 71 cents above last year’s average.

Diesel fuel prices are projected to average $3.94 per gallon this year, up from $2.88 per gallon in 2007.

At the pump, gas prices dipped slightly overnight to remain at a national average of $3.61 a gallon Tuesday, and are well above the year-ago average of $3.04 a gallon, according to AAA and the Oil Price Information Service. Diesel prices remained at about $4.24 a gallon, and both were within about a penny of record highs set last week.

Murti said his highest forecast prices represent the possible culmination of a “super spike” — the steady rise in oil prices the analyst first called for three years ago.

At the time of his prediction in April 2005, the forward crude contract settled at $57.01 a barrel. Murti saw prices ascending as high as $105 — saying that was the price at which it might be necessary to pull back significantly on energy consumption. One contrarian analyst called that figure “laughable.”

That analyst, Citi Investment Research’s Tim Evans, asserted in a client note Tuesday that oil prices have the same potential to fall by $40 to $50 per barrel over the next 6 months to two years as to rise like Murti predicts.

“The fundamental premise behind the latest calls seems thin at best,” Evans said.

But soaring oil prices have already squeezed the profits of companies from truckers and railroads to airlines — who mark fuel as their highest cost. The effects have also trickled down to consumers, as gas prices follow suit.

Oil companies, meanwhile, have racked up record profits.

Murti said he remains bullish on most facets of the U.S. energy market, especially integrated oil companies, explorers and producers, and pipeline operators.

He raised his 2008 prediction for benchmark West Texas Intermediate crude oil spot prices to $108 per barrel from $96, and his 2009 estimate to $110 from $105. He lifted his prediction for 2010 and 2011 to $120 from $110.

But he also said it was possible that oil could hit $125 this year and $200 in 2009 before coming down to $150 in 2010.

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