Supply risks and loose monetary policy are likely to support oil prices over the next year, a Reuters poll shows.
Reuters monthly survey of analysts forecasts North Sea Brent crude oil will average $108.80 per barrel in 2013, up $1.90 from Reuters' last oil price poll in September.
Supply risks are likely to push oil prices higher and ultra-loose monetary policy by major central banks should also increase liquidity in commodity markets and boost demand, said Carsten Fritsch, senior commodity analyst at Commerzbank.
Oil markets have been balanced this year between supply and demand-side worries, with slowing global economic growth holding back consumption but markets increasingly concerned over a possible loss of supply from the Middle East.
A dispute between Iran and the West over Tehran's nuclear programme has led to sanctions against the Islamic Republic, reducing Iranian supplies to world markets and halting its oil exports to the West.
Investors worry that a military conflict between Iran and Israel could cut off supplies from the key oil producing region.
We believe supply worries driven by production/export disruptions due to geopolitics and/or operational issues have for the most part edged out fears over a more significant drop in demand and continue to pose upside risk to the market, Deutsche Bank analysts said.
The injection of hundreds of billions of dollars into financial markets by the world's central banks is also likely to boost commodity prices and oil, analysts say.
Financial investors will seek refuge in real assets to protect themselves against loss of purchasing power and currency devaluation, Fritsch said. Weak fundamentals can slow, but not prevent higher prices.
Four of the 29 analysts surveyed expected Brent to average $120 or higher next year. Only three analysts expected Brent to average less than $100 in 2013, and three of 20 analysts expected the same level for Brent in 2014.
Harry Tchilinguirian, head of commodity market strategy at BNP Paribas, said he saw the potential for a sharp rise in oil prices and forecast Brent averaging $120 in 2013.
There are two elephants in the room: QE3 that will ultimately weaken the dollar and sanctions on Iran that raise geopolitical tensions and lead to lower spare production capacity, Tchilinguirian said.
U.S. crude is seen averaging $98.5 in 2013 and $100.7 in 2014.
Barclays had the highest Brent price forecast in the poll for 2013 and 2014, with $125 and $130, respectively. Raymond James had the lowest forecasts for 2013 at $80 while Capital Economics