Oil prices mixed before US data, after IEA downgrade

13th March 2013, Comments 0 comments

Crude prices diverged on Wednesday ahead of a US data release and after a downgrade to a key oil demand growth forecast, analysts said.

Brent North Sea crude for delivery in April dipped six cents to $109.59 a barrel nearing midday in London.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for April gained 22 cents to $92.76 per barrel.

Markets were awaiting the publication on Wednesday of weekly energy inventory figures for clues on current crude demand in the United States.

Ahead of the data, the International Energy Agency (IEA) eased its global forecast for growth in world oil demand for the second straight month, underscoring the effects of uncertainty from the US budget talks, sluggish Chinese business activity and unemployment in Europe.

The Paris-based IEA, which is the oil monitoring and policy arm of the Organisation for Economic Cooperation and Development (OECD), estimated that demand for oil would total 90.6 million barrels/day this year, a cut of 60,000 barrels from its forecast in February.

"The macroeconomic environment underpinning oil demand, as of yet, shows little sign of short-term improvement," the report said.

"A string of recent developments, including the US sequester, worsening Chinese business sentiment and continued deterioration in European employment lend support to the IEAs demand growth forecast," it explained.

The Organization of Petroleum Exporting Countries (OPEC) on Tuesday stood pat on its 2013 crude demand forecast, but raised its outlook for production growth by non-OPEC suppliers by 11 percent to 1.0 million barrels a day.

It expects the growth by non-OPEC suppliers to come mainly from North America.

The cartel, which accounts for around 35 percent of global supply, expects global demand of 89.7 million barrels per day in 2013, up 0.8 million from 2012.

The US Energy Information Agency on Tuesday lowered its forecast for the average WTI and Brent prices this year.

It projected the Brent price would fall to an average $108 a barrel this year from $112 last year. WTI prices are forecast to fall slightly this year, but would stick around $92 a barrel through 2014, it said in its short-term energy outlook.

Weighing on prices "are the demand forecasts of the three leading oil agencies," said Commerzbank analyst Carsten Fritsch.

"Without increased demand or a further cut in OPEC production, the global oil market will thus remain oversupplied, which may explain why oil prices have underperformed equity markets of late," he added.

© 2013 AFP

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