Crude oil prices mixed as IEA issues demand warning
Crude oil futures diverged Tuesday as the International Energy Agency warned that recent surging prices have hurt global demand for energy.
Brent North Sea crude for delivery in May rose 48 cents to $124.46 a barrel in afternoon London trade. On Monday it had spiked to $127.02 -- the highest level since August 1, 2008 -- owing to a weak dollar and Middle East unrest.
New York's main contract, light sweet crude for delivery in May, fell 62 cents to $109.30 in Tuesday trade. On Monday it had struck $113.46 -- a level last witnessed in September, 2008.
However after hitting two-year peaks, oil prices then tumbled before Monday's close, losing almost $3, as traders fretted about the impact of recent price rises on the weak US economic recovery.
The IEA warned Tuesday that soaring oil prices are beginning to hit demand.
"There are real risks that a sustained $100 dollars a barrel-plus price environment will prove incompatible with the currently expected pace of economic recovery," the Paris-based agency said in its monthly report.
The IEA noted that "global oil demand growth has shown signs of slowing in recent months in the face of sharply higher prices."
Following six months of forecast increases, the IEA kept its oil demand prediction for the rest of the year unchanged, saying it should reach 89.4 million barrels per day (bpd), 1.6 percent up on 2010.
World oil production dropped by 70,000 bpd to 88.3 million bpd in March, due to a 70 percent drop in production in Libya, where rebels in the east of the country are fighting Moamer Kadhafi's regime, backed by NATO air strikes.
"The loss of Libyan production and the 25-30 percent jump in oil prices since the crisis began in mid-February has so far drawn a limited response from fellow OPEC (Organisation of Petroleum Exporting Countries) members," the IEA said.
Traders are particularly concerned that rocketing prices could undermine the delicate recovery in the United States, which is the world's biggest economy and the largest oil consuming nation.
Surging oil prices have sparked fears of a return to the record levels above $147 a barrel seen in 2008.
The International Monetary Fund warned Monday that the high oil prices were a key risk to solid global economic recovery.
"The key downside risk to growth relates to the potential for oil prices to surprise further on the upside because of supply disruptions," the IMF warned.
© 2011 AFP