The US investment bank raised its year-end forecast for Brent to $120 per barrel from $105, and its 2012 forecast to $140 from $120, saying rising demand for fuel would draw global inventories and strain OPEC's spare oil output capacity.
Brent crude for July rose as high as $111.68 a barrel, up $1.58, before easing slightly to $111.53 by 10am GMT. US crude was trading at an intraday peak of $99.15, up $1.45.
Other analysts were also bullish on the outlook for oil prices, with strong underlying demand from the global economy seen as insulating oil from market jitters prompted by European debt worries.
"I don't rule out oil moving back to this year's highs if OPEC keeps its production constant, particularly if we get strong data out of the US, which we expect," Amrita Sen, oil analyst at Barclays Capital, said.
US light crude peaked at just under $115 per barrel at the start of May, while Brent surpassed $127 in April.
Goldman Sachs raised its 12-month price forecast for Brent to $130 a barrel from $107, and increased the end-2012 forecast to $140 a barrel from $120, citing global economic growth and tight OPEC spare capacity.
The bank, which in April had predicted the major correction in oil prices earlier this month, said on May 7 that oil could surpass its recent highs by 2012.
Echoing this view was Morgan Stanley, who raised its 2011 Brent crude forecast to $120 a barrel, from $100 previously, and lifted its 2012 target to $130, from $105.
The loss of around 1.5m barrels per day of Libyan production, and firm demand from emerging economies, will lead to tighter inventories in the second half of the year, the bank's analysts said in a report.
"It is very likely that OPEC will respond to tightening inventories by lifting their production; in response, we see flat prices moving higher as spare capacity continues its fall to untenable levels," the report said.
The Organization of the Petroleum Exporting Countries are scheduled to meet on June 8 in Vienna to discuss output.
An expected fall in US crude stocks last week could also support prices, analysts said. A drop in imports and increased refinery use are forecast to have pushed crude oil inventories lower, according to a Reuters survey of analysts on Monday.
Data showed no let up in Chinese oil imports last month, which grew 9.6pc year-on-year, its third-highest level ever, even as a purchasing managers index on Monday showed China's factories expanding at their slowest pace in 10 months in May. (source : telegraph.co.uk)