ARJUN N. Murti, the Goldman Sachs Group Inc analyst who last month forecast oil may hit US$200 a barrel within two years, has increased his prediction because production is failing to keep up with demand.

United States benchmark West Texas Intermediate crude oil may average US$118 a barrel this year, higher than an earlier forecast of US$108 a barrel on May 5, Goldman analysts led by Murti wrote in a report obtained by Bloomberg News.

Oil futures in New York have averaged US$110.31 a barrel so far this year. The price was also raised for 2009 to US$140 from US$110, and for 2010 to US$150 from US$120, they said.

New York-based Murti, a managing director at Goldman and head of Americas equity energy research, first wrote of a "super spike" in March 2005, when he said oil prices could range between US$50 and US$105 a barrel through 2009.

Last month, he said prices may rise to between US$150 and US$200 a barrel within two years as growth in supply, especially from non-OPEC producers such as Russia and Mexico, is failing to keep pace with demand.

"Incredibly, non-OPEC crude supply is down about 1 percent in the first half of 2008, well below our expectations that had called for 1 percent growth," Murti and his colleagues wrote in the report.

The Organization of Petroleum Exporting Countries, or OPEC, controls about 40 percent of the world's supplies and has 13 members, including the world's biggest oil producer Saudi Arabia.

Oil prices have almost doubled in the past year because of supply disruptions, while a slump in global equity markets and a weaker dollar against currencies such as the euro and the yen prompted investors to buy commodities as an inflation hedge. Failure of oil companies to replace reserves adequately has spurred concern about a lack of supplies in future.

European benchmark Brent crude may average US$117 a barrel this year, the Goldman analysts said.