Oil prices, which have risen by as much as 20 percent this year due to fears of supply disruption caused by Middle Eastern and North African unrest; appear to be stabilizing in recent weeks.

In London, Brent crude oil futures slipped below $115 per barrel on a slightly higher dollar, despite an expected increase in demand with the onset of the summer driving season in the U.S.

Crude prices in the U.S. have slipped to just above $100 barrel level.

The dollar, after sliding last week, is firmer, amidst additional signs the Greek debt crisis will not be resolved anytime soon.

A stronger dollar reduces demand for crude oil, which is priced in dollars.

Other analysts believe a still=tepid US economy and the ongoing Euro debt crisis will clamp down oil demand, and, by extension, oil prices.

Moreover, a report by the US government last week that gasoline demand has edged down this year, potentially putting further pressure on crude oil prices.

In addition, while the civil war in Libya has nearly shut down oil production in that country, OPEC is expected to increase output in May in order to compensate for Libya’s shortfall, according to a report in Reuters.

Julian Jessop, chief international economist at Capital Economics in London, expects Brent crude prices to keep sliding, perhaps to below the $90 barrel level by year-end.

“We continue to expect the price of a barrel of Brent crude to drop back below $90 by the end of the year, as global demand slows, the Middle East risk premium fades, and the dollar rebounds,” he wrote last Friday.

Jessop explained that his forecasts of further declines in oil prices are based on three factors:
“First, the bulk of the rebound in oil prices since early 2009 can be explained by the recovery in the world economy from the depths of the financial crisis, but global growth is now weakening,” he said.

“Admittedly, much of the recent softness in key economies, notably the US, can be explained by the surge in oil prices itself, so demand might pick up again now that prices have fallen by around $10 per barrel in the last month. However, there are other reasons to expect global growth to slow further, particularly where policy stimulus is now being reversed. Indeed, even the US is now moving towards fiscal tightening.”

Second, Jessop asserts, his expects the premium in prices due to the current unrest in the Middle East to fade away over the remainder of the year.

“This additional premium is probably still of the order of $20 per barrel,” he said.

“Of course, the crisis could escalate, in which case prices would spike higher again. However, it seems likely that the stalemate in Libya will be resolved, one way or another, in the coming months. In the meantime, there is no sign of significant disruption to supply from other oil producers, notably Saudi Arabia but also smaller players like Algeria.”

Thirdly, Jessop declared that some of the financial factors that have driven up the oil price should also go into reverse.

“The end of the Fed’s purchases of Treasury securities next month (QE2) may not be the turning point for commodity markets that many are looking for, but it will remove one reason for prices to continue rising,” he said.

“More importantly, a large part of the increase in oil prices in dollar terms since last summer can be explained by the fall in the value of the US currency. For example, oil prices have risen by around 60 percent in dollars but only 40 percent in euros. We expect the dollar to recover over the rest of the year as risk appetite fades, not least as concerns about the future of the euro zone grow again.”

In an odd twist, over the weekend, the Saudi Prince Alwaleed bin Talal told CNN his country wants oil prices to decline to between $70 and $80 per barrel as an incentive for Western countries to avoid seeking replacement (non-fossil alternative) energy sources.

He admitted that persistent high oil prices would make alternative/renewable energy that much more attractive to the West.

OPEC will meet on June 8.