Oil prices drop in line with equities
Oil prices dropped on Tuesday in line with falling equity markets and as OPEC held its demand forecast steady.
New York's main contract, light sweet crude for June delivery, shed 1.02 dollars to 75.78 dollars a barrel, having closed up 1.69 dollars on Monday.
Brent North Sea crude for June lost 80 cents to 79.32 dollars a barrel in midday London trade.
World stock markets fell and the euro retreated against the dollar on Tuesday as euphoria over a massive eurozone bailout gave way to doubt over countries' ability to reduce their deficits, analysts said.
A day after posting massive rises, equity indices also declined on profit-taking.
"Investors have already started to disperse some of their funds away from commodities and back into the US dollar having seen Chinese inflation data move up to a new 18 month high for April," said City Index market analyst Nick Serff.
"This has triggered weakness for the price of crude oil."
China said Tuesday that consumer prices and bank lending accelerated in April, fuelling fears the economy may overheat and building pressure on Beijing to hike interest rates and let its currency rise.
The OPEC oil producers' cartel on Tuesday held steady its forecast for modest growth in world oil demand this year, noting uncertainty about the global economic outlook.
"Although the economic recovery shows signs of improving momentum, important risks remain that could impact demand growth expectations for this year," the Organization of Petroleum Exporting Countries said in its May report.
"The world oil demand forecast for 2010 will mostly depend" on the performance of the United States economy, the report said.
"Should US oil demand weaken slightly and perform less than expected during the peak summer consumption season, then total world oil demand will be less than the current estimate."
The cartel said it was expecting world oil demand growth to grow by 0.9 million barrels per day (bpd) or 1.1 percent to average 85.4 million bpd for 2010. That was almost unchanged from the previous report.
"The more cautious sentiment about the continued pace of the recovery has also been reflected in oil price volatility," OPEC said.
US benchmark crude rose to more than 86 dollars per barrel before falling more than 10 dollars in three days last week.
"This strong volatility came despite the fact that crude fundamentals remain relatively unchanged and thus highlight the continued impact of financial market sentiment on crude oil prices," it said, pointing to Greece as an uncertainty factor.
"OPEC will continue to closely monitor the market, awaiting further signs that the positive momentum is broadening across all major regions."
© 2010 AFP