oil price forecast US Energy Department raises

oil price forecast US Energy Department raises : Numerous analysts and research firms raised their oil price forecasts in response to the recent surge in crude oil futures, driven by continuing unrest in the Middle East and North Africa.

The US Department of Energy followed suit yesterday, hiking its projection for the average cost of oil to refiners in 2011 by US$14 to US$105/barrel.

The department’s information arm, the Energy Information Administration (EIA), expects benchmark West Texas Intermediate (WTI) to average US$102/barrel this year and US$105/barrel in 2012.

Oil prices have been particularly sensitive to turmoil in Libya, which halved the oil-rich country’s production, forcing Saudi Arabia to step in and raise production to make up for the resulting shortfall.

Crude oil futures have been in decline this week amid speculation that the Organization of Petroleum Exporting Countries (OPEC) could soon boost production to make up for the shortfall in Libya’s output and keep the prices down.

However, Goldman Sachs (NYSE:GS) has noted that Saudi Arabia might have misled the markets about its actual oil production, which means OPEC has less spare capacity than thought.

A day later, chairman of Goldman Sachs Asset Management Jim O'Neill told Dow Jones Newswires that the risk of a supply problem is exaggerated as there was no significant shortage of oil supply and that “the market is worried about things that might not happen”, echoing a statement from Algeria’s Algeria's oil and energy minister Youcef Yousfi, who said that there was no physical deficit in the market “for the time being”.

Yet, Goldman has just raised its forecast for Brent crude prices for Q2 2011 by US$4.5 to US$105/barrel, while Investec (LON:INVP) projects Brent to trade at US$110/barrel in the first half of the year.

It has been speculated that the US could soon tap into its strategic oil reserves amid soaring gasoline prices, which have surged by 50 cents per gallon on average in the US over the past month, hitting US$4 per gallon in at least four states.

White House spokesman Jay Carney confirmed during a press conference on Monday that it was an option. However, he said that this decision would not be based solely on the price of oil and a major disruption to the flow of oil would be a factor.

Traders got more relief from reports that Libya’s long time ruler Muammar Gaddafi could soon step down, if given cash and immunity from prosecution, which would put an end to the violent clashed between forces loyal to Gaddafi and the opposition.

Oil and gas majors retreated today as oil prices declined.

BP (LON:BP) fell 1.5% to 486 pence. Fellow supermajor Shell (LON:RDSB) declined 1.2% to 3,143 pence.

BG Group (LON:BG) and Cairn Energy (LON:CNE) posted small losses.

Tullow Oil (LON:TLW) fell 2.4% to 1,425 pence. For the latest updates PRESS CTR + D or visit Stock Market news Today

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