Barclays Capital ups oil forecast to $77 for 2008

SINGAPORE (Reuters) - Barclays Capital (BARC.L) has raised its U.S. oil price forecast for 2008 to $77 a barrel, up $3.10 from its previous forecast after a rally in prices this week to record highs above $82. The bank, which also raised its 2007 forecast for U.S. crude by $2.50 to $68.80 a barrel, cited a tighter U.S. oil inventory picture and worries re-emerging over OPEC producer Iran's nuclear dispute with the West.

"The sound of war drums has been a key part of the past week, and those drums no longer sound as distant," said analysts Paul Horsnell and Kevin Norrish in a report on Wednesday.

Iran, responding to Western debate about the possibility of war over its nuclear plans, said on Wednesday it would use any means to defend itself if attacked and could bomb Israel if the Jewish state launched a strike.

"Short of some fairly radical economic discontinuity, or extremely mild winter conditions in the northern hemisphere, by Q1 2008 the oil market pips are likely to be squeaking," the analysts said.

Many analysts have yet to upgrade oil forecasts after an 18 percent rally in the past month on U.S. crude futures, which hit a fresh record of $82.51 on Wednesday, though Goldman Sachs (GS.N) said earlier this week it saw prices next year averaging $85.