Oil prices are “significantly” undervalued from what fundamental economic forces would dictate, Goldman Sachs says.

In a report obtained by Bloomberg, Goldman analyst David Greely says the global economic recovery can lift demand, pushing supply back down to a “more normal” level.

To be sure, Goldman doesn’t expect prices to explode higher. Elevated levels of inventories and “still fragile” sentiment in the market will put a cap on gains, Greely wrote.

Goldman trimmed its short-term price forecast to the lower end of its $85 to $95 a barrel range for the second half of the year.

But even the bottom of that band would represent an 11 percent gain from the recent price of $76.83.

“We continue to expect improving fundamentals will provide additional support to prices,” Greely said.

Others agree with Goldman that oil is headed higher, but not immediately.

"It will not be until well into the third quarter that oil decisively breaks above $80," Harry Tchilinguirian, a senior analyst at BNP Paribas, told Reuters.

A recent poll of 31 experts by the news agency showed a consensus forecast for oil to average $79.44 for 2010 as a whole. That would imply an increase for the rest of the year, as oil has averaged $75-plus so far this year.

Gains have been limited by the slow global economic recovery.