Amid a stalling U.S. recovery and economic soft patch, the demand fundamentals in first-half 2011 didn't warrant WTI crude oil prices rising to more than $110 per barrel. The oil price volatility that existed in the first six months—from a low of $84.32 on February 15 to a high of $113.93 on April 29—was a market reaction to supply disruptions in the Middle East and North Africa (MENA) and the continuing Greek debt drama in Europe.

While possible oil-supply disruptions in MENA and debt contagion in Europe will probably impact prices through second-half 2012, the underlying economic fundamentals are pointing to stronger growth in the second half of this year and into 2012. Consequently, oil prices should move higher over that period based on higher demand.

Our global GDP outlook, published in fourth-quarter 2010, remains on track. We continue to expect 3.5% real growth in 2011. Undoubtedly, the Japanese earthquake and its impact on several global industrial supply chains (such as automotive) slowed growth more than expected in the first half of 2011. Yet, Hart Energy projects that lost growth will be pushed forward into ensuing quarters, lessening the impact in 2011.

European debt contagion and China's restrictive monetary policy were already factored into our 2011 global GDP forecast. While we think that China may have raised interest rates for the last time in 2011, we see a risk of continued contagion in Europe.

Given our global GDP forecast, we concur with the U.S. Energy Information Administration's decision to raise its global-oil-demand forecast by an additional 0.3 million barrels per day to 88.4 million daily for 2011. Japan will use more oil for power generation in the wake of the Fukushima nuclear accident, and a Chinese soft landing will increase oil demand in Asia, despite weaker forecasted growth in the region (due to lost economic output in Japan).

The Middle East expansion of power-generation services to include a larger segment of its society will also increase oil demand. Fuel consumption in Latin America is also lifting demand marginally.

For 2012, our original global GDP projection was 3.8%. Looking at our updated quarterly projections, the full-year forecast comes in at 3.7%—in line with our October 2010 projection.

However, there is downside and upside risk associated with our outlook. On the downside, a protracted debt crisis could severely impact Spain and Italy, which account for 5.5% of the global economy. (In comparison, Greece, Ireland and Portugal contribute just 1.4% of global GDP combined.)

Another downside risk is potential continuing unrest in MENA, which could curtail OPEC oil production. Higher resultant fuel costs could hit consumer demand in market-based economies and curtail government spending in economies that have regulated fuel prices, lowering GDP growth.

Although some economists see China as a looming risk for a hard landing, we think the Asian giant applied the monetary brakes in time to nip inflation. China will likely experience lower GDP growth in the short term, but we see the move as a smart countercyclical policy that will ensure a soft landing.

Upside surprises could come from Japan, the U.S. and lower energy costs. With Japanese growth being pushed into second-half 2011 and first-half 2012, the impact on 2012 Asian GDP growth will be marginal.

The U.S. could yield another upside surprise. If successful pro-growth policies are passed by Congress to help curtail the deficit without significant burden placed on the private sector, U.S. GDP growth should boost global output by a couple of percentage points.

Lastly, if the turmoil in the oil-producing MENA countries dissipates, lower fuel costs could provide a tailwind for GDP growth.

Given our forecast, we would not be surprised to see the EIA increase its 2012 demand forecast for oil. Currently, the forecast calls for an increase of 1.6 million barrels a day of additional demand, bringing global oil consumption to 90 million daily by 2012. We are slightly more bullish; we expect demand to rise by an additional 1.7 million daily, and oil prices to move higher.