Oil may average $101 this year, EIU says

Many factors will have an impact on crude prices this year, including the MENA unrest, the devastation in Japan and economic outlooks for the United States, China and India
The price of a barrel of crude oil will average out at $101 this year, the Economist Intelligence Unit has forecast, and will remain the main driver of Gulf economies.
Although the political unrest in the Middle East and North Africa will put upward pressure on oil prices, there will be corresponding downward pressure as economic growth cools in India and China as a result of monetary tightening, the EIU said in a briefing.
"If the unrest in the region escalates, however, oil prices could go all the way to $115 or $120," said EIU editor Ayesha Sabavala. "The loss of nuclear power as a result of the earthquake and tsunami in Japan may increase the demand for oil as a substitute. However, the damage to production capacities in the country will compensate for that as it will act as a damper on oil demand."
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The International Energy Agency has estimated that about a million barrels per day of oil production has been lost in Libya since the start of March 2011, leaving only about 0.6 million barrels still coming to the market each day from that country.
However, Saudi Arabia and the United Arab Emirates have already indicated that they have enough spare capacity to make up that shortfall.
There has been concern that the price of crude may spike to as much as $200 per barrel this year, more than 33 per cent above its all-time high of $147. However, the illusion of a "low" oil price is probably based on the fact that many market participants regard the all-time high of $147 in 2008 as benchmark.
On February 23, Eni, the Italian oil giant, announced that it had partially shut down its production in Libya, which drove prices up 3.1 per cent. Brent crude, which is the European benchmark oil price, increased by 5.7 per cent on that day.
Protests against the government in Bahrain and Yemen have also contributed to the increasing oil prices, as traders feared that the riots could "spill over" into Saudi Arabia, one of the world's largest oil producers, Kuwait-based Global Investment House said.
West Texas Intermediate the benchmark for oil prices in North America, increased by 5.2 per cent during February 2011 and 1.4 per cent the next month up to March 18. In the year to that date, however, WTI prices grew by 10.6 per cent.
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According to the Erste Research Group, at its current level the oil price is more than 200 per cent above its long-term average of $32.6. Even adjusted for inflation, oil is anything but cheap. At $35 per barrel on an inflation-adjusted basis, oil is traded above its long-term average.
"We believe that oil will be traded with a substantially higher political premium in the future. In our opinion, the large-scale geopolitical fire and its effects are clearly underestimated," the Group said in recent research.
According to Global, a large portion of world oil demand growth is expected to come from China, North America and the Middle East. The increase in China's oil demand is expected to account for 35 per cent of the total oil demand growth in 2011.

(Source: http://www.zawya.com/story.cfm/sidZAWYA20110327114110)