SINGAPORE : Oil prices are seen climbing back to US$100 a barrel by mid-2011 as global demand is seen growing as much as 2 million barrels per day, up from 1.5 million barrels this year, according to Goldman Sachs.
Analysts said China and other emerging markets will be at the forefront of improved energy demand.
Financial investors are also betting on prices to rise further in the futures and options markets. They have quadrupled their net long positions in oil contracts since early July.
The Organisation of Petroleum Exporting Countries (OPEC) is quite optimistic about oil demand next year.
The cartel said global demand will rise 1.4 per cent to 87.1 million barrels a day next year.
OPEC added that the additional oil demand will mostly come from emerging markets, with developed economies accounting for less than a fifth of the growth.
Dominic Schnider, Head of Commodity Research at UBS Wealth Management, said: «At the beginning of the year, they were actually quite cautious in pushing up prices with the risk of a double dip. This has changed in recent months.
«OPEC is becoming more and more confident with prices above 85 dollars, towards 100 dollars, so there is a shift taking place at the moment in the way OPEC is looking at prices, and I think this definitely helps to underline higher prices in 2011.»
More OPEC members are producing more than their output quotas to take advantage of high prices.
Current compliance, which is the ratio of producers sticking to agreed output quotas versus those supplying more, is at 54 per cent, versus 85 per cent in March last year, when the global economy was in recession following the financial crisis.
Financial investors, including hedge funds, are positioning themselves for a further increase in oil prices.
Their net long position in Nymex light, sweet crude now equals 207,000 contracts, up from just over 50,000 in July this year.
Ong Yi Ling, an investment analyst at Phillip Futures, said: «Much of this incremental oil demand will come from countries such as China and India, and I think there is a possibility for crude oil demand to surprise on the upside, particularly from China.
«So if you look at 2010, China has increased its oil demand about 0.88 million barrels per day, and compared to the initial forecast of the beginning of the year, it was a forecast of 0.35 million increase, so there is really a lot of upside surprise in oil demand coming from China, and we expect this to continue into 2011.»
Analysts aid oil prices will break through the US$90 a barrel resistance level in the first half of next year.