Barclays ups 2008 oil price forecast to $97.70/bbl

SINGAPORE, Feb 28 (Reuters) - Barclays Capital raised its 2008 price forecast for U.S. crude oil to an average of $97.70, up more than $10 from its previous estimate, driven by robust distillates demand from non-OECD nations and low non-OPEC supply.

The UK-based investment bank also raised its estimate for Brent crude to $96.40 a barrel, as crude oil prices hit record highs.

"Global distillate markets look like raging bull markets, given the extent to which the incremental global demand barrel is dominated by distillates," it said in a research note.

"OECD demand looks weak (as it has been for three years), but non-OECD demand looks robust and Chinese demand is improving."

The bank added that daily production from non-OPEC Mexico in 2008 is projected to decline by 250,000 barrels and Norway by 220,000 barrels.

Barclays expects U.S. West Texas Intermediate (WTI) crude to average above $100 for second-half 2008, up about $6 from the first-half average, also because it expected the weak U.S. economy, which had triggered concerns of lower demand, to recover during that period.

U.S. crude price CLc1 retreated to $99.07 a barrel on Thursday, after reaching a record high of $102.08 on Wednesday. London Brent crude LCOc1 was at $97.63, after spiking to a peak of $100.53.

In a Reuters poll last month, Barclays predicted U.S. crude to average $87.40 a barrel and Brent at $85.80 for 2008, already the second highest forecast. [ID:nL2482995] (Reporting by Max Lin; Editing by Ramthan Hussain)