June 30 (Bloomberg) -- Goldman Sachs Group Inc., the world's biggest securities firm, said supply and demand, rather than speculators, are responsible for oil's rally.

Concerns that the gains in prices are part of a speculative bubble are ``unwarranted,'' said Goldman, one of the two biggest oil traders on Wall Street alongside Morgan Stanley. Stockpiles would increase if prices were too high relative to supply and demand, bringing excess supplies to the market, analysts Jeffrey Currie and David Greely said in a report yesterday.

``We are not observing anything approaching sustained growth in physical inventories,'' the report said. ``Current prices are supported by supply and demand fundamentals. The commodity markets are not behaving in a way that a speculative bubble would suggest.''

Crude oil, headed for the biggest six-month gain since 1999, rose to a record high above $143 a barrel today. U.S. presidential candidates John McCain and Barack Obama have both said speculation in oil markets must be curbed after gasoline rose to more than $4 a gallon at the pump, hurting consumer spending power.

The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world's oil, has said it is powerless to stop oil's rise because it's driven by speculators as opposed to demand and supply.

Goldman's Currie forecasts that oil will average $148 in New York next year, the second-most bullish prediction among 33 banks surveyed by Bloomberg. The bank's head of Americas equity research, Arjun N. Murti, said last month that oil may reach $200 within the next two years.

Commodities Revenue

Goldman said on June 17 that revenue from trading commodities rose in the second quarter. The firm doesn't provide any separate figures for the business, reporting it under the category of fixed income, currencies and commodities. Revenue in this broader segment fell 29 percent to $2.38 billion in the second quarter because of credit market losses.

The U.S. House of Representatives last week approved a bill calling on the Commodity Futures Trading Commission to use its emergency powers to ``curb immediately the role of excessive speculation'' in any market it oversees where energy futures or swaps are traded.

Speculative long positions, or bets by hedge funds and other institutional investors that prices will rise, outnumbered short positions by 24,217 contracts on the New York Mercantile Exchange in the week ended June 24, according to CFTC data. Net- long positions rose by 11,505 contracts, or 91 percent, from a week earlier.

`Conveying Information'

``It is not speculators moving the market, it is the information on forward supply and demand fundamentals that they are conveying,'' the Goldman Sachs report said.

The removal of speculators from commodity markets would force the market ``to function with less informed views, degrading the price discovery mechanism,'' the report said.

Crude oil for August delivery rose as much as $3.46, or 2.5 percent, to $143.67 a barrel in electronic trading on the New York Mercantile Exchange. It was at $140.58 a barrel at 12:20 p.m. in New York.

To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net;

Last Updated: June 30, 2008 12:58 EDT