The US Department of Energy lifted its projection for the average cost of refiners in 2011 by $14 to $105 a barrel.
According to US Energy Information Administration, the benchmark WTI crude will average $102 a barrel this year and $105 a barrel in 2012.
Oil prices have been particularly sensitive to turmoil in Libya, which halved the oil-rich country's production, forcing Saudi Arabia to step in and raise production to make up for the resulting shortfall.
Crude oil futures have been in decline this week amid speculation that the OPEC could soon boost production to make up for the shortfall in Libya's output and keep the prices down.
However, Goldman Sachs has noted that Saudi Arabia might have misled the markets about its actual oil production, which means that OPEC has less spare capacity than thought.
Yet, Goldman has just raised its forecast for Brent crude prices for Q2 2011 by $4.5 to $105 a barrel, while Investec projects Brent to trade at $110 a barrel in the first half of the year.
It has been speculated that the US could soon tap into its strategic oil reserves amid soaring gasoline prices, which have surged by 50 cents per gallon on average in the US over the past month, hitting $4 per gallon in at least four states.
White House spokesman Jay Carney confirmed that it was an option. However, he said that this decision would not be based solely on the price of oil and a major disruption to the flow of oil would be a factor.
Traders got more relief from reports that Libya's long time ruler Muammar Gaddafi could soon step down, if given cash and immunity from prosecution, which would put an end to the violent clashed between forces loyal to Gaddafi and the opposition.
Oil and gas majors retreated today as oil prices declined
