Oil could shoot up to $200 within the next two years as part of a "super-spike" driven by poor growth in oil supplies, investment bank Goldman Sachs said in a research note.
"We believe the current energy crisis may be coming to a head, as a lack of adequate supply growth is becoming apparent," Goldman said in the note made available to Reuters on Tuesday.
Oil hit a new record near $121 a barrel on Tuesday, continuing an advance which has seen it double over the past 12 months.
"The possibility of $150-$200 per barrel seems increasingly likely over the next 6-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty," Goldman said.
Goldman, which was one of the first to point to a triple digit oil price more than two years ago, said it believed the market was approaching the crunch in the "super-spike."
The "super-spike" theory argues that a lack of adequate supply growth along with price-insulated demand growth in non-OECD countries will lead to a dramatic and continuous rise in oil prices that will ultimately lead to a sharp correction in oil demand.
Goldman analysts said the underlying drivers of the rise in oil prices remained firmly in place, noting poor growth in non-OPEC supplies, low OPEC spare capacity, restriction on foreign investment in key oil producing nations and healthy demand growth in non-OECD economies.
"In our view, a gradual rally in prices is likely to be longer lasting than a sharp, sudden spike," the note written by U.S.-based analyst Arjun Murti said.
Goldman said it had raised its spot oil price forecasts for U.S. WTI crude for 2008 through to 2011 to $108 rising to $110 and $120 a barrel, up from $96 rising to $105 and $110 respectively in its earlier forecast.
"We see risk to our 2008 and 2009 forecasts as distinctly to the upside," it said.