Goldman: Crude to stay high long term

Bank raises five-year outlook by $15 to $60 a barrel, says cost uncertainty is hindering investment.

LONDON (Reuters) – Goldman Sachs raised its U.S. oil price forecast for the rest of this year Thursday by $13.50 to $67 a barrel as demand outstrips supply and the industry sits on billions of dollars it could invest in finding new oil.

The investment bank, which dominates the commodities markets, also increased its average U.S. price forecast for 2006 by $13 to $68 a barrel and said it expected longer-term oil contracts to hold firm at around $60 a barrel, reflecting the increased financial risk of getting extra oil out of the ground.
Even with prices at close to record levels, it said oil companies were sitting on huge cash piles rather than pouring money into new projects because of uncertainty over their profitability.

“Even at current high price levels, re-investment rates appear to be falling not rising, pushing industry cash reserves near $500 billion,” Goldman Sachs Commodity Research said in a note.

Reuters