The US Energy Information Administration expects crude oil markets to tighten through till 2012 and for heating oil prices to jump 7.4 percent. Issuing its Short Term Energy Outlook this week, the EIA said oil prices initially fell following the International Energy Agency’s strategic oil reserves release announcement on June 23. Prices have since risen above pre-announcement levels, but the EIA said it was difficult to attribute recent price changes to the oil release announcement because of the diverse range of drivers affecting global oil markets. They included changing expectation of world economic and crude oil consumption patterns, uncertainty over supply disruptions in North Africa and the Middle East, varying estimates of OPEC spare capacity, and other physical and financial factors such as extreme weather events and floating currency rates and European debt concerns. The EIA projected that total world oil consumption would grow by 1.4 million barrels a day in 2011 and 1.6 million daily barrels in 2012 – mainly on burgeoning demand from emerging economies such as China and India. As oil markets tightened on growing demand and slowing production growth in non-OPEC countries, oil prices would increase. West Texas Intermediate spot prices, which averaged $79 per barrel in 2010, are forecast to average $98 per barrel in 2011 and $103 per barrel in 2012. Markets would likely rely on both inventory draw-downs and production increases from both OPEC and non-OPEC oil-producing countries to meet demand.

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