World oil demand will rise faster than expected, while supplies will remain tight, the latest International Energy Agency (IEA) report has warned.
Demand for oil is unlikely to flag, says the IEA
The IEA predicted demand would rise by an average 2.2% a year between 2007 and 2012, up from previous estimates of 2%.
It added that geo-political tensions and a lack of spare capacity in Opec production would also limit supplies.
Brent crude rose 16 cents to an eleven-month high of $75.78 a barrel although US light crude fell slightly.
It closed down 62 cents at $72.19.
One analyst said a range of persistent economic and political factors meant that prices were on an upward curve.
"The oil price is at very high levels for good reasons," said David Dugdale, from MFC Global Investment Management.
"With Opec continuing to withhold oil from the market, the general picture remains one of tightness, with kidnappings in Nigeria, the upcoming hurricane season and ongoing geopolitical concerns all adding to uncertainty over the summer."
In its report, the IEA argued that biofuel production would hit 1.8 million barrels by 2012, more than double 2006 levels.
However, while supplies of the green fuel are set to surge, it is likely to remain marginal with just a 2% slice of the overall energy market.
It also echoed warnings issued in an Organisation for Economic Development report that rapidly growing biofuel market will increase the price of certain feedstocks - such as sugar and corn - over the coming year.
But with forecasts predicting world economic growth to increase by 4.5% a year, the report argued that oil demand could soar to 95.8m barrels a day (bpd) in 2012 from 81.6m now.
At the same time it predicted production from oil cartel Opec would fall, slipping by 2m bpd in 2009, while it also cut supply forecasts for non-Opec countries by 800,000 bpd.
It added that other factors including rising refinery costs, engineer shortages and strong demand in other energy markets would also put pressure on oil supplies.
"Despite four years of high oil prices, this report sees increasing market tightness beyond 2010," the IEA said.
"It is possible that the supply crunch could be deferred - but not by much."