European Banks Increase Oil Price Forecasts

Societe Generale and Credit Suisse on Tuesday raised their oil price forecasts for 2008 and 2009, joining a growing list of investment banks increasing their estimates as oil prices hover near record highs.

Credit Suisse raised its forecast for U.S. crude in 2008 to $120 a barrel from $91, and for the following year to $110 from $90.

"Based on continued restrictions in access to resources and on further visible cost inflation (mainly in steel and labor), we raise our longer term forecast to $100 from $75," analysts at the Swiss bank said in a research note.

Its French peer Societe Generale also raised its forecast for 2008 by $14 a barrel to $115, and by $10 to $110 for 2009.

"In our view, the financial and fundamental drivers have staying power," SG analyst Mike Wittner said in a note.

Wittner said SG's price forecast for the second half of 2008 now stood at $122, having been revised upward by an average of $22 a barrel.

U.S. crude hit a record of $127.82 a barrel on Friday, and some analysts have predicted it could rise to as much as $200 in the next two years.

Goldman Sachs, the most active investment bank in energy markets, last Friday sharply raised its average forecast for oil prices in the second half of 2008 to $141 a barrel, up from a previous projection of $107.

For 2009, it expects prices to average $148.

The bank, one of the first to point to triple-digit oil more than two years ago, earlier this month said oil could shoot up to $200 within the next two years as part of a "super spike," citing tight supply.

"Crude prices are being driven upward by a powerful combination of ongoing financial investor flows and strong fundamentals, both short-term and long-term," said SG's Wittner.

"Product demand growth remains solid, led by non-OECD countries and by gasoil, and non-OPEC supply has underperformed. These factors are also supporting long-dated crude prices, which have been recently increasing at a faster pace than nearby prices."