In its March "Short-Term Energy Report," the DOE/EIA raised its oil price forecast for 2012 to $106/bbl, up $5/bbl from the previous forecast amid concerns over geopolitical tensions in the Middle East, growth in world demand and supply constraints in non-OPEC countries.
Yet, the agency revised lower its oil demand projection for this year. Global oil demand is expected to reach 88.96 million bbl (MMbbl), down from last month's estimate of 89.25 MMbbl last month but up 1.2% from the upwardly revised 87.9 MMbbl in 2011.
Meanwhile, OPEC also slightly revised down its estimate for 2012 global oil consumption, to 88.6 MMbbl from the 88.2 MMbbl projected last month. The IEA, on the other hand, expects global demand to stay unchanged at 89.9 MMbbl this year.
In other oil news, the IEA stated in a report that, as the EU oil embargo begins in July, shipments from Iran would drop by 50%. Saudi Arabia attempted to calm market worries by pledging to supply the lost oil from Iran so that oil deliveries to European countries would not be affected.
Meanwhile, US President Obama and UK Prime Minister Cameron jointly said that the window for a diplomatic solution with Iran was shrinking. Tensions over Iran are expected to continue to exert influence on oil's direction in the near term.