the quiet before the storm

May 24, 2011, 8:28 AM ET Goldman:

Time To Hop Back Into Oil After $15/Barrel FallAustralian Dollar Drops 1%,

By Murray Coleman

After yesterday?s fall of more than 2%, key oil ETFs and sister ETNs are pointing higher this morning.

And after a double-digit fall in prices from April highs that were touched earlier this month, some leading analysts are telling clients that this might be an opportune time to jump back into the crude market.

The U.S. Oil Fund (USO) is up 1.6% in pre-markets. The iPath S&P GSCI Crude Oil ETN (OIL) is ahead by 0.6%.

In futures markets light, sweet crude for July delivery is up $1.19 to $98.89 a barrel on the Nymex.

Brent crude for July delivery was up $1.34 to $111.44 a barrel.

Both were down from earlier. Oil futures in New York had reached intraday highs of $99.15 a barrel and Brent hit $111.72 a barrel following notes from Goldman Sachs and Morgan Stanley raising their 2011 and 2012 forecasts.

?We believe that the market will continue to tighten to critical levels by 2012, pushing oil prices substantially higher to restrain demand,? Goldman Sachs wrote.

In its research note to clients, Goldman said the recent pullback in oil markets, which have lost around $15 a barrel compared with the highs seen in April and on May 2, provided a ?good entry point for long positions in crude oil.?

Goldman raised its forecast for Brent oil at the end of 2011 to $120 a barrel from $105 a barrel previously. It increased its forecast for Brent at the end of 2012 to $140 a barrel from $120 a barrel.

Meanwhile, analysts at Morgan Stanley also hiked their 2011 and 2012 Brent crude oil price forecasts to $120 a barrel and $130 a barrel, respectively. Those were up from $100 and $105 a barrel previously. The analysts cited the loss of Libyan oil exports and firm demand in emerging markets.

Morgan Stanley added that without an increase in production from OPEC, inventories will tighten in both the third and fourth quarters. That supported Goldman?s contention that investors should consider jumping back into the market.

A weaker dollar was also helping to bolster prices on Tuesday. The PowerShares U.S. Dollar Index Bullish (UUP) is down ahead of the regular session today by 0.2%.

On tap later today and Wednesday is data on U.S. oil inventories from the American Petroleum Institute and the Department of Energy.

Also worth noting is that the U.S. Natural Gas Fund (UNG), which gained 1.6% to open the week, is pointing up 0.7% so far. The ETF has lost more than 3% in the past month and is down more than 7% so far in 2011.