Oil prices to jump 10% on supply fears and strong demand


The International Monetary Fund forecast oil prices will gain 10 percent on average in 2012 compared with a year earlier on possible supply disruptions and more demand. Non-fuel commodity prices are expected to decline 10 percent.

The oil estimate compares with a January forecast for a 4.9 percent drop and assumes a price of $114.71 a barrel, based on the average of Brent, Dubai and West Texas Intermediate crude, the IMF said in its latest World Economic Outlook report. It raised its forecast for non-fuel commodity prices from a 14 percent drop in January. The global economy will expand 3.5 percent this year, revised from 3.3 percent previously.

Crude reached the highest price since May last month amid speculation that Western sanctions aimed at halting Iran’s nuclear program will disrupt Middle East shipments. The U.S. and its allies say Iran is seeking the capability to make an atomic bomb. Iran says it’s conducting research for civilian energy and medical purposes. Commodities climbed 5.2 percent and global equities gained 8 percent this year amid signs of growth in the U.S., the world’s largest economy.

“Iran-related risks are the biggest concern,” the IMF said. “Geopolitical risk is unlikely to subside soon; this risk has increased precautionary demand for oil inventories. Activity-related oil demand growth is also likely to strengthen as the recovery in global activity advances.”


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