Oil to average record $84 this year on tight supply

LONDON (Reuters) - Oil will climb to a record average above $84 this year, a Reuters poll of analysts showed on Thursday.

Many analysts revised their estimates for the first quarter because they think OPEC is unlikely to raise output, even though prices have scaled to new peaks above $100, amid the weakness of the dollar and political tensions related to oil producing countries.

Some said demand from emerging markets will continue robust, although economic slowdown might later dent fuel use in the United States, the world's largest oil consumer.

The monthly survey of 30 analysts put the consensus forecast for U.S. crude futures in 2008 at an average of $84.07 a barrel, up $2.74 from last month's poll.

The average price for oil last year was $72.30.

In oil's six-year rally, U.S. crude has risen above $100 several times this year and it hit a fresh record high of $102.08 a barrel on Wednesday.

"Right now, it is dollar weakness that is driving the current prices," said Thorsten Fischer, a senior economist with Royal Bank of Scotland.

"We still see strong demand from emerging markets, especially China and India. Fuel prices are often subsidized in these countries, so high oil prices do not really have impact on demand."

The bank revised up estimates for the first and second quarters and the full 2008 year. But it left 2009 forecasts unchanged from the previous Reuters poll in late-January.

"We see the current oil prices as not sustainable because a slowdown in the economy will dent demand," Fischer said.

Lehman Brothers cut its second quarter estimates from the previous poll in January because its says oil inventories in the United States will continue to rise.

A change in output policy by the Organization of the Petroleum Exporting Countries (OPEC) will have an impact on oil prices, analysts said. The group will meet on March 5 to discuss its next move.

Remarks from OPEC ministers have suggested the group, the source of more than a third of the world's oil, is not likely to raise output.

Frank Schallenberger with Landesbank called the meeting a "litmus test" to see how the group would respond to $100 oil.

"If OPEC continues to ignore the tight oil market in the coming months, triple-digit oil prices will be the rule and not the exception. I will then be forced to raise my price assumptions," he said.

The 2008 forecasts for U.S. crude showed Credit Suisse the lowest at $75 and Barclays Capital the most bullish at $97.70.

The Reuters poll showed prices will peak this year, while U.S. crude prices will stay above $80 through 2010.

The previous poll showed the average price of around $78-79 through 2010.

In contrast, Barclays and Fortis project oil prices will continue to rise further.

Barclays sees oil averaging $137 in 2015. It cited expected declines in supplies from non-OPEC producers.

Key non-OPEC oil production comes from Russia and the North Sea, mostly from the waters of Norway and the United Kingdom.

London's Brent futures are expected to average $82.35 for 2008, up by $2.55 from the previous poll.

First Energy Capital raised its estimates by more than $10 for Brent and U.S. crude -- and put Brent at a premium to U.S. crude in a reversal of the traditional relationship.

"With the UK being a net importer of crude, Brent should be well bid," said Martin King of First Energy Capital.

He also noted relatively low levels of global inventories and strong global demand.

Brent prices are directly or indirectly used for pricing other export crude oil grades, such as African and Middle Eastern, while U.S. crude is consumed domestically.

Political tensions related to oil producers will also continue to sustain the prices, including Iran's long-standing nuclear row with the West, unrest in Nigeria and disputes in the Venezuelan oil sector.

Reuters monitors price forecasts by analysts, consultants and government bodies.