In its Short-term Energy Outlook for November released last week, the Energy Information Administration raised its expectations for global oil demand for the fourth quarter and 2010, and revised higher its price projections for gasoline and diesel fuel sold at retail outlets in the U.S.

In releasing the outlook, the EIA also lifted its price forecast for West Texas Intermediate crude oil $7 bbl to $77 bbl this winter, defined as October through March, as expectations of an economic recovery and higher oil consumption offset concerns about a current surplus supply in inventory. The forecasts for monthly average WTI prices rises to about $81 bbl by December 2010 assuming U.S. and world economic conditions continue to improve.

“Higher projected crude oil prices in 2010 (refiner average cost of crude oil almost $17 per barrel, or 40 cents per gallon, higher than the 2009 average) contribute to an expected $0.45-per-gallon increase in regular-grade gasoline prices, to an average of $2.81 per gallon next year,” the EIA said.

That's a sharp increase from the $2.36 gal average projected for this year, which was revised up 2cts from month prior due to climbing crude costs. The forecast also compares with a $2.55 gal average for October and estimates for a $2.70 gal in November. The agency projects regular grade motor gasoline prices to average $2.66 gal during the current quarter.

For retail diesel fuel, the EIA pegs the U.S. average in 2010 at $2.94 gal, up from a $2.48 gal estimate this year. It also compares with a $2.79 average projected for the fourth quarter, revised up from October's estimate of $2.60 for the last three-month period of the year.

“Higher forecasted crude oil prices also raise the projected average household expenditures on heating oil this winter to $1,940 in this forecast, compared with $1,864 last winter,” the agency said. Heating oil residential prices this winter are expected to average $2.80 gal, up from $2.63 gal last winter.

Total consumption of liquid fuels and other petroleum products are forecasted by the EIA to decline by about 780,000 bpd or 4.0 percent in 2009 compared with 2008. During the first half of the year, consumption decreased nearly 1.25 million bpd or 6.3 percent versus the same period last year - marking one of the steepest declines on record.

EIA said monthly average motor gasoline consumption since June has shown year-over-year increases for the first time since September 2007 and continues to grow over year-ago levels throughout the forecast period.

The year-over-year projected decline in petroleum consumption slows to 310,000 bpd or 1.6 percent in the second half of 2009 as economic recovery begins to take hold.

The modest economic recovery projected for 2010 contributes to a 290,000 bpd or 1.6 percent increase in total liquid fuels consumption, which will be led by an increase of 110,000 bpd or 3.0 percent in distillate consumption. With the exception of residual fuel oil, consumption of all major products will grow in 2010.

For global oil demand, the EIA revised up its expectations for world oil consumption by 150,000 bpd for the remainder of 2009 and for 2010, citing sustained economic growth in China and other Asian countries.

It is the second consecutive month the EIA has raised its global oil demand outlook. On Oct. 6, the EIA revised higher its outlook by 200,000 bpd.

In November's report, the EIA said although it expects oil consumption by the developed countries that make up the Organization of Economic Cooperation and Development to continue showing year-over-year declines for the fourth quarter, it also expects oil demand growth in the non-OECD countries during this period to more than offset those losses, leading to the first growth in global oil consumption in five quarters.

The EIA projects world oil consumption to grow in 2010 by 1.26 million bpd, much of it coming from non-OECD countries. OECD oil consumption is anticipated to grow by only 100,000 bpd in 2010, largely because of the projected turnaround in the United States, which would mark the reversal of a downward trend in U.S. oil consumption that began in 2005.