OIL FELL towards $115 a barrel yesterday, as a prediction of a further decline in consumption and higher supplies offset concerns about potential output disruptions in the Middle East.
The International Energy Agency (IEA) said ample supply from North America and Iraq coupled with declining global demand could lead to an easing of oil prices over the next five years.
Brent crude was down 56 cents to $115.16 a barrel by mid-afternoon during a volatile sessionduring which the contract fell to $114.23 before recovering. US crude was up 13 cents at $92.20.
The IEA cut its global oil demand growth projection for 2011-2016 by 500,000 barrels per day (bpd) compared to its previous report, easing the pressure on Opec to produce more oil.
It also cut its 2013 global oil demand projection by 100,000 bpd to 90.48 million bpd, citing lower consumption in Europe, the Americas and China.
“It seems like the market has reacted on the negative side. Crude oil prices reversed from yesterday’s gains amid concerns over confirmation of the global oil demand growth,” said Myrto Sokou, a senior research analyst at Sucden Financial.
“The bearish IEA figures set the tone for the day so we can expect further declines for today’s trading session,” she added.
Oil major BP has secured US government permission to ship US crude to Canada. And Royal Dutch Shell has applied for an export licence, as rising production in the world’s top oil consumer upends global energy flows.
“This will significantly alter the oil market dynamics in the coming years as US crude imports are expected to decline and exports to rise,” said Ryoma Furumi, a commodity sales manager at Newedge Japan.
But geopolitical risks, lower output in the North Sea due to maintenance and a supply crunch in oil products are propping up prices in the face of dwindling global fuel demand.
“Tension in the Middle East is definitely a factor that should keep oil above the $85-to-$90 level,” said Chris Barber, a senior analyst at Energy Security Analysis in Wakefield, Massachusetts.
“The consumer confidence number is going to support the up-trend.” – (Reuters, Bloomberg)
