DnB Markets’ Torbjørn Kjus predicts oil prices will decline slightly in 2012, and believes they will end on an average of 109 dollars per barrel for 2012. He attributes this to a danger of an overproduction of oil in the second quarter.

“It appears that non-OPEC countries will increase their production by 800,000 barrels per day, despite problems in Syria and southern Sudan. In addition, Iraq has increased production because of improved infrastructure, and Libya is back in production,” he told Aftenbladet.

“If you include declining demand in the U.S. and Europe, we are still facing an overproduction of oil of 800,000 barrels per day. We could be seeing oil prices of nearer 100 dollars a barrel if this trend continues.”

Falling demand for oil in the U.S

Demand for oil in the United States has fallen recently, amongst other things because of reduced car traffic. Surveys show that Americans are driving ever-shorter trips, leading to decreased demand for fuel.

Americans are also driving smaller and more fuel-efficient cars. Over half (54 percent) of all new car purchases in the United States were SUVs five months ago, today, the proportion has declined to 45 percent.

Moreover, Mr Kjus points out that development of alternatives to fuel has now really taken off, probably due to the high oil prices. General Motors will be launching the first pickup to run on both natural gas and fuel towards the end of the year.

“We expect some boost in demand in the U.S. because there are reports of an improvement in the economic situation, but I'm beginning to doubt this,” he said.

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