Analysts predict second half spike in oil prices

Crude oil prices were lower on Tuesday even as analysts predicted that prices will spike again later in the year as supplies tighten. The International Energy Agency increased its prediction for global oil demand and called again on the Organization of Petroleum Exporting Countries to raise production quotas. The IEA said that demand will average 86.1 million barrels per day globally this year, 2 percent higher than 2006’s demand. US Gasoline inventories are currently 6 percent lower than they were at this time last year and most believe that refineries will not be able to catch up in order to provide sufficient supplies for the summer driving season.

Meanwhile, analysts at Merrill Lynch (NYSE: MER; TYO: 8675) predicted that if OPEC doesn’t raise its production by 350,000 barrels of crude oil per day prices could go as high as $80 per barrel in the second half of the year. Meanwhile an analyst at Barclays Capital, the investment banking division of Barclays Bank (LSE: BARC; NYSE: BCS; TYO: 8642), said that it isn’t likely that OPEC will move fast enough to increase quotas to avoid higher prices.

But for the day July contracts for Brent crude dropped 86 cents to $68.70 per barrel on the Intercontinental Exchange, while West Texas Intermediate crude for July delivery was down 62 cents in mid-afternoon trade on the New York Mercantile Exchange to $65.35 per barrel. At the same time, Nymex July gasoline and heating oil were each 2 cents lower, to $2.14 per gallon and $1.91 per gallon respectively.