Oil prices will soar above $130 a barrel by late 2011, a new Reuters poll found, and one in five traders said they expected oil to hit $150 this year, levels some economists say could trigger recession.

With no end in sight to the unrest in the Middle East and North Africa, the majority of the 32 major oil traders, bank analysts and hedge fund managers surveyed by Reuters since Monday said they expect oil prices to resume their climb later this year after a short-term retreat.

Brent crude fell 52 cents to $121.78 a barrel at 0421 GMT today after rising to a 2-1/2-year high above $123 on Wednesday. US crude futures declined 45 cents to $108.38 a barrel, after touching $109.15 on Wednesday, the highest since September 2008. 

World oil prices in the $130-$150 range ring alarm bells for macroeconomic forecasters.
 'It would be devastating, I would think,' said Yelena Shulyatyeva, BNP Paribas. Her growth forecasts are based on oil at $110 a barrel.

'If we see something like $130, that would definitely hit confidence, and consequently consumer spending will be hit even more than in our forecast.'   

Cary Leahey at Decision Economics in New York said most people estimate that oil at $130 a barrel would shave 0.5 to 0.75 percentage points from growth in the United States, which now is expanding around a 2.5 to 3 percent rate.

In the Reuters poll, almost two-thirds of the traders and oil experts said they do expect a short-term correction from today's level to below $120 by the end of June. One expected it to drop below $100 a barrel. But any decline would be temporary, most respondents said.

'There are a lot of uncertainties in the market right now,' said Fadel Gheit, managing director at Oppenheimer & Co in New York, who forecast $135 toward year end in the poll. 'Global tensions are likely to support oil for now, but in time prices above $120 for Brent and $100 for West Texas Intermediate (WTI) will undoubtedly slow global economic growth.'

Higher prices already are starting to weigh in the United States, the world's largest oil consumer.

US government data on Wednesday showed US gasoline demand over the past four weeks declined 1.2 percent from year-ago levels. Average pump prices are near $3.60 a gallon, edging up toward the $4 level seen in the summer of 2008 when crude oil hit a record $147.50, seting off a plunge in US gas demand.

Torsten Slok, an economist at Deutsche Bank in New York, said he would watch sales of new and used cars very closely for early signs of whether the recent price surge is hurting economic growth. US car sales have been rising recently and autos accounted for 1 percent of the Q4 US GDP growth of 3.1 percent.  

If car prices slip, Slok said, 'I would also start to get worried that maybe then we're starting to see oil prices bite into the outlook.'   

There may be temporary relief. Most traders said the current rally is starting to look overdone. With the loss of Libyan output now priced into the market, investors are increasingly wary of chasing prices higher. No clear threat to other Middle East supplies is on the immediate horizon despite simmering unrest in the region.

Only three of those surveyed expect prices to top $130 this quarter.
 Still, most respondents expect rising world oil demand combined with ongoing Middle East unrest to help propel oil higher, with over half expecting Brent to rebound above $130 a barrel at some point in 2011, and one in five predicting prices will reach a record $150 a barrel by the end of the year. - Reuters