New York (Platts)--16May2008

Goldman Sachs forecast further price rises over the long term for an oil
market already hitting new highs on a daily basis in a report released by its
commodities group on Friday.

"To balance trend global GDP growth of 3.8% against trend supply growth
of 1%, prices need to rise on average 14% from here in [the second half of
2008]," the report said.

Last week, a bullish forecast on oil prices came out of Goldman Sachs'
energy equities research team.

The commodity group cited long-dated prices as one of the reasons for its
conclusions. "After remaining stable for more than two years, the long-dated
oil price [five-year forward] is once again driving the oil market," the
report said. The June 2013 contract on NYMEX settled at $119.52 Thursday; just
a month ago, it was between $105-$106.

That long-dated price will "need to rise at a rate which will force trend
demand growth in line with trend supply growth," the report said.

Goldman noted that the recent rise in long-dated prices was similar to
that of 2004, when they rose at an annual rate of 55%. An increase similar to
that would push average second-half 2008 prices to $141/b, according to the
report.

Goldman's analysts did see enough short-term weakness that they predicted
contango may return to the market. The June-July backwardation at present is
roughly 40 cents.

"We now expect a return of the bear-bull market, which is a cyclical bear
market overlaid on a structural bull market," the report said. A short-term
correction could be as much as 15%, the report said, and any pullback, from an
investment perspective, "is an opportunity to reestablish long positions in
oil before the summer."