Aug. 12 (Bloomberg) -- The U.S. government cut its forecast for the price of crude oil and gasoline this year, citing slower global demand growth and increasing production capacity.

West Texas Intermediate crude oil, the U.S. benchmark, will average $119.09 a barrel in 2008, the Energy Department said in its monthly Short-Term Energy Outlook. The forecast is down 6.5 percent from $127.39 a barrel estimated last month, the report from the department's Energy Information Administration showed.

Crude oil rose to a record $147.27 a barrel on July 11 on the New York Mercantile Exchange. Crude for September delivery fell $1.44, or 1.3 percent, to settle at $113.01 a barrel at 2:46 p.m. today in New York.

``We have lowered prices from last month's peak but they are still very high,'' said Tancred Lidderdale, an economist with the EIA in Washington who supervises the report. ``Gasoline, heating fuel and crude oil are higher than a year ago and will continue to hurt consumers.''

Regular gasoline will average $3.65 a gallon at the pump this year, down 4.9 percent from $3.84 estimated in last month's report. Prices averaged $2.81 a gallon in 2007.

Global Consumption

Global oil consumption will probably increase 780,000 barrels to 86.31 million barrels a day this year, the report showed. The forecast was down 90,000 barrels from estimates in the July report. Demand will rise 990,000 barrels to 87.3 million barrels a day in 2009, down 460,000 barrels from last month's forecast.

U.S. oil demand will average 20.2 million barrels a day this year, down 480,000 barrels a day from 2007. This year's demand forecast was reduced 100,000 barrels from last month.

Countries outside of the Organization of Petroleum Exporting Countries will produce 49.15 million barrels of oil a day this year, up 90,000 barrels from 2007, the report showed. Non-OPEC producers will pump an average 50 million barrels a day in 2009.

``New supply is coming from the U.S., where the Thunder Horse and Tahiti fields offshore in the Gulf of Mexico are coming online,'' Lidderdale said. ``There's new offshore production in Brazil and from Azerbaijan in the former Soviet Union. This new production from non-OPEC countries should meet most of any new demand.''

Homeowners in the U.S. can expect to pay more to heat their homes with heating oil and natural gas this winter, according to the report. The heating season lasts from October through March.

U.S. homeowners who use heating oil will see their bills surge 36 percent to an average $2,644, the report showed. Heating oil will average $4.34 a gallon, up 31 percent from a year earlier.

Natural Gas

Natural-gas consumers will spend $1,059 to heat their homes, up 22 percent from $855 a year earlier, according to the report. Natural gas will cost an average $15.58 per million cubic feet, up 22 percent.

Domestic natural gas output is expected to increase by 8 percent this year, compared with 6.4 percent forecast in July, according to the report. Supplies are expected to expand 3.7 percent in 2009, up from last month's projection of 1.6 percent.

Consumption will also be higher this year than previously expected on increased use of gas for power generation, which is projected to expand 3.4 percent this year and 3.1 percent in 2009.

Overall gas consumption will jump 3 percent this year and 1.7 percent in 2009, compared with earlier estimates of 2.1 percent and 1.1 percent, respectively, the department said in the report.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: August 12, 2008 16:07 EDT