Average crude oil prices are expected hit a high note to end the year, then fall in 2013, while U.S. oil production should hit its highest level in two decades, according to the October forecast by the U.S. Energy Information Administration (EIA).

Oil prices could rise slightly to $111 per barrel in the final quarter. Next year, they would drop off to an average $103, the agency said.

The agency predicts oil inventory increases in the first half of 2013 to reach higher levels than the same period this year because of a production boost from non?OPEC (Organization of the Petroleum Exporting Countries). North America makes up the lion’s share of non?OPEC growth, with production increases this year of 1 million bbl/d.

Next year, output will increase to 670,000 bbl/d, according to the EIA. The rise is due to continued growth from shale plays and other tight-oil formations as well as from Canadian oil sands.

The report forecasts that OPEC crude oil production will stay flat next year, though OPEC members will continue production of more than 30 million bbl/d of crude oil over the next two years to meet demand and offset any supply disruptions.

Instability in the Middle East and North Africa could keep prices high, EIA notes in its Short-Term Energy and Winter Fuels Outlook. Forecasted prices are based on Brent crude oil, a benchmark for global prices.

After two years of declining consumption of crude oil and liquid fuels in the United States, EIA sees a mild turnaround. It estimates an increase of 110,000 bbl/d or about 0.6%, in 2013. In 2011, consumption fell by 230,000 bbl/d, about 1.2%, as gasoline demand slackened. This year, forecasted consumption will fall by 280,000 bbl/d, or 1.5%.

The agency also forecasts U.S. real gross domestic product to grow by 2.2% this year and 1.7% the next. Projected world oil-consumption-weighted real GDP grows by 2.7% this year and 2.5% in 2013.

The predicted increase is based on assumptions of continued growth in freight shipments and industrial use along with winter weather in line with typical temperatures.

This winter, heating oil expenditures are estimated to be higher than any previous winter on record. Domestic household spending for heating oil could increase by 19% and natural gas by 15% compared to last year. About one?half of U.S. households use natural gas as their primary heating fuel.

In dollar terms, EIA expects households heating with natural gas to spend on average an additional $89 this winter compared to the unusually warm winter of 2011?12. The increase would represent less than a 1% increase in the average U.S. residential price from last winter and a 14 % increase in consumption.

The expectation of more spending is based on a return to typical winter temperatures east of the Rocky Mountains. The Northeast, Midwest, and South will be about 2% warmer than the 30?year average (1971 – 2000), but still 20% to 27 % colder than last winter, according to the National Oceanic and Atmospheric Administration’s (NOAA) most recent projection of heating degree days. The West is projected to be only about 1% colder than last winter.

This year, gasoline prices have had ups and down. Earlier this year, the price spiked to an April average of $3.90, before falling to $3.44 per gallon in July. Rising crude prices climbed back to $3.85 per gallon in September. Overall, estimated regular gasoline retail prices will average $3.65 per gallon for the year and $3.44 per gallon in 2013. Rising crude prices contributed to the September run?up in regular gasoline retail prices.