"Forget oil at $80 a barrel", said Iranian Petroleum Minister last year and his claims are proving to be true as the US Energy Information Administration (EIA), in its latest Short-Term Energy Outlook January 2010, has echoed the same - forecasting global oil price to average $100 a barrel for 2012. EIA estimates have more often than not been accurate - at least when it comes to the direction if not the magnitude. Global oil experts believe that oil prices are ready to take a 2008-like flight and $150/bbl is a level that can be ruled out by the end of 2012. Brent crude oil averaged $111/bbl in 2011 as oil prices were mostly dictated by the Arab unrest and subsequent disruptions in Libyan oil supply. The situation in that part of the world seems to have eased considerably, but the Brent crude latest price was seen hovering around $112/bbl - up $5/bbl in just two weeks. What the 2011 Arab unrest has done to oil price dynamics will take some time before it detaches, unless a huge shift in demand and supply is witnessed - which does not appear to be the case at present. Experts opine that oil prices will continue to carry a $10-12/bbl premium on account of the geopolitical situation, over and above what the supply-demand dynamics will dictate. In this scenario, warning from Iran over the Strait of Hormuz row is all set to spice the oil market with all sorts of speculations and hence an even greater premium is likely to be attached to it. Moreover, US and China, worlds two largest consumers of oil, have reported healthy economic numbers of late and that has brought in more confidence amongst investors. On the supply side, it is not all about Iran; Nigeria too is flexing its muscles as fears of supply disruptions are now being seriously taken by the market and the oil price refuses to recede. The weakening dollar too, is contributing its bit towards more expensive oil. Predicting is tough and predicting oil prices is even tougher, but it appears that there is little room for oil prices to recede to under $100/bbl. The EIA, too, expects volatility to remain on the higher side, just as it did in 2008, which is likely to make more room for speculation. What the future holds is to be seen, but oil in double-digits a barrel does see a distant dream.
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