Oil prices are set to go higher and higher, according to Erste Group. A barrel of  Brent crude is expected to average at USD 123 - today's (March 5) price- until March 2013, according to Erste Group analysts. Escalation of tensions in Iran could force oil prices up as high as USD 200 per barrel and the US Federal Reserve Bank plans to maintain the zero interest policy until 2014, which will keep commodities' prices in general high.

Last year saw an all time high for Brent crude, with a USD 111 per barrel average for the year. The Erste Group report gives unrest in North Africa and the Middle East and the policies of important central banks as continuing causes for high oil prices.

Other factors are also at play and are set to have a significant impact on prices. Demand from India and China continues to grow, China overtook the US as the world's largest energy consumer in 2011.

The 'break even' price for many oil producers is high and extraction of conventional oil is stretched to the limit.“In my opinion, the maximum global extraction of conventional oil has already been surpassed. Although I assume that unconventional extraction methods would be able to compensate for this to a great extent, the sources that can be easily exploited have already been largely exhausted,” said Erste Group commodity expert Ronald Stoeferle. He goes on to predict rising use of shale oil to meet demand, which, according to the report, is profitable at prices of USD 60 per barrel plus.

Erste Group, a financial services provider in Central and Eastern Europe, has 3,200 branches, in eight countries from the CEE region, including Romania. The group has EUR 210.0 billion in total assets and recorded an operating result of around EUR 3.6 billion in 2011.

Liam Lever, liam@romania-insider.com