Looking back at 2010, it might come as a surprise to realize that the annual average price for a barrel of West Texas Intermediate (WTI) crude oil was the second highest on record, coming in at just under $80 (all prices are US$ per barrel). With the global economy still in recovery mode, as the U.S. continued to battle high unemployment levels and the European sovereign debt crisis lingered, WTI quietly averaged $78 for the first three quarters before surging above $90 in December. The question now becomes, where do we go from here?

There is plenty of debate as to whether oil prices are headed to the $100 marker and higher, or will fall back to $80. The range of oil-price forecasts highlights this uncertainty, as analysts try to predict major drivers for 2011.

In a recent poll of 34 analysts compiled by Bloomberg, the average 2011 price forecast for the Nymex benchmark of WTI was $87, as of January 3, 2011. Hart Energy believes this is an accurate marker for 2011. Hart's newly launched oil-price-forecasting service pegs the average price for 2011 at $84 (the forecast was released on December 1, 2010). Continuing economic issues in the Eurozone and a tightening of monetary policy in China expose downside risk for global growth. Given high crude-oil inventories in the U.S. and excess OPEC spare-production capacity, the oil surplus will have to be absorbed by higher demand before prices average $100 for an extended period of time.

Along with a conviction that global oil supply will pace demand growth, industry analysts have referenced currency-related and technical reasons for their predictions of lower oil prices for 2011.

"Part of what the commodities rally was all about was they were the currency of last resort in terms of storing value," John Kilduff, a partner with New York-based Again Capital LLC , told Bloomberg in early January. "Economic prospects are helping the dollar."

If the dollar continues to strengthen, it will apply downward pressure to oil prices, as investors will be more likely to invest in bonds and equities instead of commodities. A significant appreciation in the U.S. dollar would make it tough for prices to make a run at $100.

"Crude may decline to as low as $82 or $80 a barrel if hedge funds and other speculators decide to take profits by selling contracts," said Petromatrix's managing director OIivier Jakob in a recent report. "If there is some genuine profit taking from large speculators, then we need to consider the risk for further downside."

Bullish Outlook

On the opposite side of the forecasting fence, those who are more bullish on prices suggest strong global economic growth will lead to another year of robust oil demand, forcing OPEC to increase production due to marginal non-OPEC production growth. Barclays Capital predicts an average price of $85 for crude oil in 2011 but shows a dramatic increase to $106 in 2012. Barclays analyst Paul Horsnell says in a recent report that, while Chinese oil demand is expected to slow, the potential for upside surprises should not be discounted.

"With the inventory overhang having all but disappeared, supply dynamics are likely to come back to the fore, particularly towards the back end of 2011," he says. "As the year-over-year positive momentum from key contributors of non-OPEC supply growth, the U.S., China and Russia, begins to fade, the step-up in decline rates in North Sea output and deterioration in oil-production prospects in several other key non-OPEC regions is likely to make the supply outlook challenging once again."

He adds that shrinking non-OPEC supply growth will prompt OPEC to fill the void, leaving spare capacity noticeably stretched.

With such a wide range of forecasts, and no consensus as to what the primary driver of crude oil prices will be, 2011 should be another wild ride for the oil market.