Oil prices are expected to average above $107 this year and to stay above $102 for the next two years due to concerns over long term supply constraints and strong demand from emerging markets, a Reuters survey of analysts found.
The monthly survey of 33 analysts put the consensus forecast for U.S. crude in 2008 at an average of $107.13 a barrel, up by more than $10 from the last poll late in April.
The average price for oil last year was $72.30.
North Sea Brent is expected to average $106.12 this year, compared with $95.40 in the last poll.
Hikes in oil prices this year have been larger than most analysts' expectations, leading many to raise their forecasts. Revisions for next year are higher than for 2008.
The median forecasts for U.S. crude is above $106 for next year and above $102 in 2010, compared with $92 for both years in the last poll.
The Reuters poll showed oil prices would peak this year as many analysts said high prices had started to dent demand.
"We do not think current oil prices are sustainable," said Thorsten Fischer with Royal Bank of Scotland.
Davide Tabarelli, the president of Nomisma Energia in Italy, said: "The market sooner or later will start to function again, bringing more equilibrium, lowering the speed of demand and boosting supply -- something that is happening very slowly in the last three years." Analysts' forecasts for U.S. crude this year showed a wider divergence of about $30 than in the last poll.
It was becoming increasingly difficult for analysts to predict oil prices, they said.
French bank Fortis had the most bullish short-term view. It expected U.S. crude to average $125 this year and $165 next year.
Goldman Sachs, the most active investment bank in energy markets, raised its forecast for U.S. crude to an average $125 this year.
Long term supply constraints may push up oil prices to $200 eventually, Goldman Sachs said earlier in May.
The bank was among the first to say several years ago oil might hit $100.
U.S. crude and Brent prices have risen about 40 percent this year to unprecedented levels above $135 this week due to supply disruptions from key oil producer Nigeria late in April and because demand from China and India continue to be robust.
A weak U.S. currency also encouraged investors to shift money from weakening dollar assets to oil, whose recent rallies have been surpassing gains on most other markets.
The Organization of the Petroleum Exporting Countries, source of more than a third of the world's oil, has reiterated its view that the market is well supplied and ignored repeated calls from consumer nations to hike output to help ease prices.