Some major investment banks are still betting that oil prices will grow next year despite an emergency injection of crude on world markets from the U.S. and other countries.
Higher oil prices should eventually push gasoline prices up as well.
Benchmark crude climbed as high as $97.48 per barrel Tuesday after Barclays Capital raised its 2012 price forecast for Brent crude, used to price many international types of oil. And Goldman Sachs said the International Energy Agency's decision at the end of June to release 60 million barrels of oil from its reserves won't cool off prices as much as originally thought.
Independent oil analysts say prices still could head lower this year. But some think IEA's announcement speaks volumes about its expectations for world oil supplies.
"I think it's an admission from them that Saudi Arabia might not be able to produce enough oil on its own" to meet increased world demand, analyst Stephen Schork said.
Benchmark West Texas Intermediate crude on Tuesday gained $1.95, or 2 percent, to settle at $96.89 per barrel on the New York Mercantile Exchange. In London Brent crude added $2.22 to settle at $113.61 per barrel on the ICE Futures exchange.
Barclays increased its 2012 forecast for Brent crude by $10 to $115 per barrel on Tuesday, saying prices will rise as global oil demand increases. Barclays sees China, India, Saudi Arabia and Brazil as the main sources for demand growth. Barclays actually lowered its expectations for benchmark WTI oil, but its forecast for an average price of $100 per barrel suggests prices are still headed higher this year.
Barclays higher outlook for Brent was enough to send all petroleum commodities higher, analyst Jim Ritterbusch said.
The bottom line, Ritterbusch said, is that refineries in Europe will continue to struggle to replace Libyan oil that was cut off when an anti-government uprising that began earlier this year. "They're continuing to suffer the loss of those supplies, and that's affecting everything," he said.
Goldman Sachs also pointed out late last week that the IEA will actually release only about two-thirds of the oil it said it would. Goldman analyst David Greely said about a third of the 60-million barrel total will come from limiting the amount that countries are required to keep in emergency supplies. Since the oil industry tends to keep much more on hand than what's required, Greely said that the new limits will have an "almost negligible impact on oil prices."
Greely said prices probably won't fall as much as he'd expected following the IEA announcement. He revised his "near-term" Brent crude price forecast from $117 to $109-$111 per barrel, and his 2012 Brent forecast from $130 to $125-$127 per barrel.
Also on Tuesday the government said U.S. factory orders rose, as businesses ordered more airplanes, autos, and oil-drilling equipment in May. The Commerce Department report suggested that supply disruptions from Japan's earthquake and tsunami in March are easing.
Meanwhile, U.S. gasoline pump prices hit $3.562 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular has dropped 42.3 cents from three-year highs set in early May, but it's still 83.8 cents higher than the same time last year.
In other Nymex trading for August contracts, heating oil rose 3.21 cents to settle at $2.9566 per gallon and gasoline futures gained less than a penny to settle at $2.9774 per gallon. Natural gas picked up 4.1 cents to settle at $4.371 per 1,000 cubic feet.
Chris Kahn can be reached at www.twitter.com/ChrisKahnAP