World oil prices dipped on Monday as the West's energy watchdog warned that a slowing global economy would nag at demand for crude.
Prices fell below $29 a barrel in London and dipped gently towards $30 in New York after the International Energy Agency (IEA) cut its forecast for growth in global crude demand by more than eight percent to 1.5 million barrels per day.
The fall in crude prices was modest however because the IEA warning was hardly unexpected, given the slowdown currently gripping the US economy, analysts said.
The Brent North Sea March contract in London fell 19 cents to $28.99 a barrel. In New York, the light sweet crude March contract fell 45 cents to $30.58.
"The global economy is slowing, curbing demand," said the IEA in its monthly report, warning of turbulent market conditions ahead.
"Oil demand figures since October have fallen below expectations. Even January shows only modest growth, despite strong short-term substitution of oil for natural gas in North America," the report said.
As a result, it cut its forecast for oil demand growth by 140,000 barrels per day to 1.5 million barrels. Analysts were not surprised by the warning.
"It's not really a shock to anyone," said Lawrence Eagles, a market expert with the GNI brokerage.
"People have been expecting world demand to slow, but the economic situation is so unclear," he added. "Some people are talking about a recession in the United States, but some people think it will be a relatively small blip."
Oil market players are nonetheless nervous of the impact a global slump could have on oil prices. A collapse in demand following the 1997-98 Asian financial crisis was a factor in reducing oil prices to below $10 a barrel.
If demand does slow, the focus will turn to producer nations to see if they will restrict output accordingly to maintain price levels.
The Organization of Petroleum Exporting Countries (OPEC) has already moved to slash output by five percent from February, and the IEA figures could persuade some to militate for further cuts at a meeting next month.
Qatar suggested over the weekend however that further output cuts may not be necessary when it meets next month. Saudi Arabia had already made similar remarks last week.
"In the light of the current situation on the global oil market, OPEC does not need to cut its production," Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said, quoted by the Emirati agency WAM.
"If prices stabilized around Friday's level, we see no need to reduce output," he added. The basket price used by OPEC to help set output stood at $26.98 on Friday, against $27.67 the previous day, the Vienna-based OPECNA agency said Monday.
Iraq remains another unknown factor in the oil equation, with fitful exports ever since it blocked shipments in December after the United Nations rejected its pricing formula for the oil-for-food programme.
Baghdad demanded a surcharge of 40 cents a barrel from customers into an account outside of UN control, but last month decided to cut the premium to between 25 and 30 cents.
This allowed it to increase oil production by 500,000 barrels per day (bpd) in January as consumers began to accept the surcharge, the Middle East Economic Survey (MEES) said Monday.
Iraq's January oil production totaled 1.7 million bpd. In December it was 1.2 million bpd -- less than half the average of 2.5 million bpd over the past two years, it said.—AFP.
©--Agence France Presse 2001.
© 2001 Mena Report (www.menareport.com )