Oil prices slipped to a nine-month low last week amid signs the demand is going to weaken due to sluggish economic growth in the US, the world’s largest economy and recession in parts of Europe as well as on rapidly increasing production, particularly in North America.
On Thursday, the International Energy Agency (IEA) cut its forecast for global oil demand growth this year by 25,000 barrels per day (bpd) to 795,000 bpd, citing weaker-than-expected oil use in developed economies, particularly Europe and Japan, as well as Russia and India.
The IEA cut its forecast of growth in global oil demand for the third straight month. The US Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (Opec) also revised their forecasts lower last week.
US crude oil inventories rose last week to their highest level since 1990, the EIA reported said on Wednesday.
On Friday, Brent for May settlement, which expires on April 15, fell $1.29 to $102.92 a barrel on the London-based ICE Futures Europe exchange. The more actively traded June future slid $1.41 to $102.97. The European benchmark grade was at a premium of $10.58 to WTI futures on Friday, the smallest gap on an intraday basis since January 26, 2012.
“Oil prices at $120 a barrel was not really supported by fundamentals. So, it’s natural that prices have fallen. High oil prices are weighing on demand in the US and Europe, as well as in Asia,” Robin Mills - Head of Consulting at Dubai-based Manaar Energy told Gulf News by telephone.
“We are going to see strong US production continuing, which would put further (downward) pressure on oil prices. However, if Brent prices fall below $100 a barrel, then Saudi Arabia will take action and cut production to defend the price. For the rest of the year, they can do that. The global oil prices will probably stay around $100 a barrel or slightly lower for the remainder of 2013.”
Crude oil production from the Opec fell to 30.25 million bpd in March from 30.42 million bpd in February, a decrease of 170,000 bpd, as Iraqi and Nigerian volumes dropped, according to a Platts survey of Opec and oil industry officials and analysts released last week.
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