Oil prices drop in line with stock markets
World oil prices fell on Wednesday, in line with tumbling global equity markets and the stronger dollar, as investors set aside news of a brighter demand outlook from the International Energy Agency.
Brent North Sea crude for delivery in September sank 1.07 dollars to 78.53 dollars a barrel in afternoon London trade.
New York's main contract, light sweet crude for delivery in September, dropped 1.06 dollars to 79.19 dollars.
Global stock markets plunged after both the US Federal Reserve and the Bank of England downgraded their economic outlooks, sparking deep concern over the global recovery, dealers said.
"Crude oil prices retreated below 80 dollars per barrel, following losses in the global equity markets, while the strengthening US dollar weighed on the energy market," said Sucden analyst Myrto Sokou.
A stronger greenback makes dollar-priced oil more expensive for buyers using weaker currencies. In turn, that tends to dent demand and prices.
In Paris, the IEA said on Wednesday that it had lifted slightly its estimate for world oil demand this year by 80,000 barrels per day, and for next year by 50,000 barrels per day.
This was on the basis that the global economy would grow by 4.5 percent this year but by 4.3 percent in 2011.
Total demand for oil this year would rise by 1.8 million barrels per day from demand last year or by 2.2 percent to 86.6 mbd. It would then rise by 1.3 mbd or 1.5 percent to 87.9 mbd next year, according to the IEA.
"The IEA monthly report is likely to provide some support for crude oil prices," added Sokou.
"It raised its forecast for the global oil demand for 2010 and 2011, but said that if the global economy seems weaker than initially considered, then any potential rise in the oil consumption will be wiped out."
Economic recovery is pushing up estimates of oil demand this year and next, but there are dangers to growth in advanced nations and some emerging countries are on the prowl, the IEA added.
The IEA is the oil strategy and monitoring arm of the 31-member Organisation for Economic Co-operation and Development
Later on Wednesday, meanwhile, all eyes will turn to the US Department of Energy's weekly snapshot of American crude reserves in the world's biggest energy-consuming nation.
© 2010 AFP