Goldman Sachs has raised its Brent crude price forecast for 2011 and 2012 on expectations that fuel demand growth will draw on global inventories and strain Opec's spare oil output capacity. 

The Wall Street bank said it was "structurally bullish" on oil and raised its year-end Brent forecast to $120 per barrel from $105 a barrel, and its 2012 forecast to $140 from $120.

"It is only a matter of time until inventories and Opec spare capacity will become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supplies," Goldman analysts led by David Greely said in a report dated Monday.

Goldman predicted in April a correction in oil prices, ahead of the asset-wide rout earlier this month. It said the recent pull back provides a good entry point to buy oil and recommended going long on the December 2012 ICE Brent crude contract.

"We expect that the ongoing loss of Libyan production and disappointing non-Opec production will continue to tighten the oil market to critically tight levels in early 2012," the report said.

Goldman also said that the current pause in economic growth is nearing a trough and creating upside potential for metal prices.

"While a sharp decline in world economic growth remains a downside risk to commodity prices, we see the current slowdown in economic growth as part of a normal mid-cycle pause, partially driven by higher commodity prices, and therefore not a reason to expect commodity prices to decline substantially," the report said. - Reuters