Oil prices climbed above $101 per barrel Tuesday after the government boosted its price forecast for the end of this year and 2012.
Benchmark crude rose 29 cents to end the day at $101.28 per barrel in New York. Brent crude, which is used to price foreign oils that are imported by U.S. refineries, rose 98 cents to finish at $110.51 a barrel in London.
Prices increased in afternoon trading after the Energy Information Administration boosted its oil price forecast for the final three months of 2011 and all of 2012.
The government expects the average price of oil will rise to $98 per barrel next year, up from a previous forecast of $91 per barrel last month. The increase accounts for recent plans by Canadian pipeline companies to transport oil from overloaded storage tanks in the Midwest to the Gulf of Mexico.
Enbridge and Enterprise Products Partners announced last month that they planned to relieve a glut in Midwestern oil supplies that has held down benchmark crude prices most of the year. The companies plan to pump oil to the Gulf Coast. That will push benchmark oil prices closer to other kinds of crude like Brent.
Oil prices rose on Tuesday despite a second warning from Standard & Poor's about European debt.
The credit ratings agency said it may downgrade a bailout fund for cash-strapped eurozone members. The warning follows a similar announcement on Monday that S&P may downgrade 15 European countries, including Germany, because of the region's ongoing problems with massive government debts.
German Chancellor Angela Merkel downplayed S&P's warnings. But a downgrade would make it more expensive for European nations to raise money, hampering efforts to pay down those huge debts. Many analysts predict that Europe will slide back into recession, and the concern is how far the banking crisis will spread.
Further weakening in the European economy will impact the global economy, cutting energy consumption by major manufacturers in the U.S. and China.
Meanwhile, the latest data shows Americans continue to use less gasoline. MasterCard SpendingPulse said Tuesday that drivers have cut back on gasoline purchases every week for the past 37 weeks, when compared with the same period a year ago.
U.S. gasoline pump prices were unchanged on Tuesday at a national average of $3.275 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular has tumbled by 71 cents from its peak this year near $4 per gallon, though it's still about 32.cents more than it was a year ago.
In other energy trading, heating oil rose 2.93 cents to end at $3.0217 per gallon, and gasoline futures increased 3.17 cents to finish at $2.6454 per gallon. Natural gas rose 2.6 cents to end the day at $3.4870 per 1,000 cubic feet.