- Oil prices could hit $85 a barrel by July, when demand for gasoline is high, said Dan Yergin, vice chairman of IHS Markit.
- Yergin is particularly concerned about falling output in Venezuela, and says Middle East tension may also keep the oil price rally going.
- Demand for gasoline could begin to fall if prices rise much beyond current levels near $3 a gallon, according to Yergin.
Oil prices may continue to rally past 3½-year highs and all the way to $85 a barrel as soon as July, according to Pulitzer Prize-winning author and closely followed energy analyst Dan Yergin.
Prices in the oil market have been steadily rising since last year, fueled by strong demand and output caps imposed by major producers aimed at draining a global crude glut. More recently, oil futures have rallied faster than expected as geopolitical tensions rattle the market.
, the international benchmark for oil prices, rose toward $80 a barrel on Tuesday after hitting its highest level since November 2014.
Yergin said the cost could continue to climb due to the combined impact of falling output in crisis-stricken Venezuela, renewed U.S. sanctions on Iranian crude exports, and wars in Yemen and Syria that involve major oil-producing nations.
"We could see oil prices in July when demand is high ... several dollars higher than it is. We could see it as high as $85 at least for a short period of time," Yergin, vice chairman of IHS Markit, told CNBC's "Squawk Box" on Wednesday.
Yergin's remarks add an influential voice to a chorus of analysts warning about prices spikes. Goldman Sachs last week said Brent crude could spike above its $82.50 summer forecast, while Bank of America Merrill Lynch warned Brent could hit $100 a barrel by next year.
Yergin said he is particularly concerned about Venezuela, where the fundamentals of the oil market and geopolitics are both at play. Venezuelan output has fallen from almost 2.5 million barrels a day a couple of years ago to roughly 1.4 million barrels a day today, and could drop to 800,000 barrels a day by next year, he said.
"The screws are really tightening on Venezuela," said Yergin, who notes that ConocoPhillips is seeking to seize assets owned by state oil giant PDVSA and warns Sunday's presidential election threatens to draw fresh U.S. sanctions.
To be sure, the higher prices are a "big stimulus" for U.S. drillers, who could start pumping more, and Saudi Arabia can tap its spare capacity to meet demand, said Yergin. However, drillers in western Texas are facing bottlenecks and it's not yet clear whether the Saudis are willing to wind down their deal to limit production with their fellow OPEC members, Russia and other producers.
On Tuesday, Again Capital founder John Kilduff told CNBC he believes the Saudis could let U.S. crude prices, currently about $71 a barrel, run up to $80-$85 a barrel.
Higher oil prices could start to dent demand for gasoline if the cost rises much higher than current levels, according to Yergin. The average price of a regular gallon of gasoline in the United States is $2.891, up from $2.336 per gallon at this time last year, according to AAA.
The impact could come sooner for nations that import a lot of fuel. Yergin said India's energy minister reported to him that gasoline prices are already "pinching" the Indian economy.
"It's not like you just go from one level to another, but there's a gradual" impact, he said. "But if it persists and goes up, then you will see a bigger effect on demand."