Goldman Sticks with $149 Oil Forecast

The price of oil will spike back to $149 a barrel by the end of the year, despite its current slump and negative sentiment regarding demand for oil, Goldman Sachs wrote in a market report on Wednesday.

Chinese oil import data for August are expected to be weak as the country relied on existing inventories during the Olympic Games, but this is likely to change, the analysts said.

"We continue to expect that strong Chinese buying will return to the market as China restocks after the Games," Goldman Sachs

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[GS  Loading...      ()   ] wrote. "For oil we continue to believe this will require (West Texas intermediate) crude oil prices to move back to $149/barrel by year end."

Despite a negative reading for the Chinese Purchasing Manager's index (PMI) -- indicating contraction in the manufacturing sector -- for the second month in a row, other indicators, such as retail sales and fixed assets investment, stayed robust.

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Cumulative loss of supply from shutdown of pipelines because of Hurricane Gustav, the explosion of the BTC pipeline in Turkey and the shutdown of an oilfield in Angola was almost 40 million barrels, Goldman Sachs analysts wrote.

Uncertainty remains high regarding demand in the countries that are not members of the Organization for Economic Co-operation and Development (OECD), while demand from OECD members will remain weak, the report also said.