EIA sees oil even higher in 2012

It is becoming clearer by the day that crude oil prices are in no rush to recede to double digits. The EIA, US Energy department, is the latest to join the bull wagon, forecasting WTI oil prices to average $110.75/bbl for the rest of 2011 - that is $4/bbl higher than the closing WTI price of yesterday.
Prediction ain an easy job, especially when it comes to oil prices, and the EIA also warns not to bet your houses on the forecast yet. The point that has taken analysts by surprise is that the EIA has raised the price forecast by $5/bbl for 2011 from the previous months outlook - its biggest monthly revision in recent history.
The EIAs 2011 forecast will find many endorsers as most of the energy experts see the uncertainty risk attached with the oil price to sustain it over the $100/bbl mark. It is the 2012 forecast that has shocked quite a few and has sent ripples in the market, as the EIA predicts the level of $113.5/bbl for the coming year.
"EIA expects oil markets to continue to tighten over the next two years given expected robust growth in world oil demand and slow growth in supply from non-Organization of the Petroleum Exporting Countries (non-OPEC) countries," reads the short-term energy outlook released yesterday.
The 2012 forecast somewhat seems close to Ahmadinejads prediction of $150/bbl Brent crude price, which was ridiculed by leading energy analysts as a politicking ploy. The EIA is unlikely to attract such criticism as it has based its forecast on the assumption that global demand will continue to rise, which will exhaust surplus capacity and bring down inventory levels as supply disruptions continue to pose a visible threat.
The outlook says that demand over the next two years will still be "strong enough to result in an expected drawdown of global petroleum stocks and a call for increasing production from OPEC member countries".
Bear in mind that it is believed that a risk premium has been attached to crude oil prices owing to the MENA unrest, and that premium is supposedly at it lowest and can only be expected to inch up should the situation go any worse.
Although the OPEC members have assured the market of supporting the oil market stability by managing production, the EIA sees a dip of 4 percent in ending inventory levels for the rest of 2011 and 2012, which gives reason enough for oil prices to stay higher.
While the OPEC does not seem too bullish, it still admits that the risk premium alone is significant enough to put upward pressure on oil prices, despite its commitment towards offsetting the supply disruptions.
All eyes are on the next few months which will surely be a true test of the strength of the global recovery to see if it can avert the 2008-like crisis.