Tight oil supplies, red-hot global demand and a weakening dollar will boost average oil prices to a record level next year, a Reuters poll showed on Wednesday.
Analysts raised their average 2008 oil price forecast for U.S. crude to $67 a barrel as many believe the current rally will continue well into next year. The forecast surpasses the record average of $66.24, reached in 2006.
"Behind the market tightening, we see global oil demand accelerating in the second half of this year and maintaining strong momentum through early 2008," said independent analyst Geoff Pyne of Enerpyltd.com.
Falling U.S. crude stocks, concern about storm damage to Gulf of Mexico oil installations,
a half-point cut in key U.S. interest rates and a weak dollar have pushed oil to a record
$83.90 a barrel this month.
Analysts forecast oil prices to finish strong this year with U.S. crude averaging $69.82
in the fourth quarter. The average 2007 oil price is estimated at $66.07, slightly lower than
last year due to the market's brief dip below $50 in January.
"For the balance of this year, we do not see much downside given current OPEC production
trends," said Harry Tchilinguirian, senior oil analyst at BNP Paribas.
"And the usual geopolitical suspects -- Iran, Iraq, Nigeria, Venezuela -- will feature again prominently next year," he added.
The Organization of the Petroleum Exporting Countries pledged this month to raise oil output by 500,000 barrels per day from Nov. 1, but the move did little to soothe consumer
concerns that supplies may run thin this winter.
Analysts' 2008 forecasts for U.S. crude showed a wide divergence of $27. Goldman Sachs,
the most bullish in the poll, predicted WTI crude to average $85 next year with prices
climbing as high as $95 by the end of 2008.
Analysts believe prices will peak in 2008 with average U.S. crude prices declining to $62.74 the following year and $59.41 in 2010.