Oil Falls Towards $35 After IEA Demand

Friday, January 16, 2009 at 5:35 pm

Oil Falls Towards $35 After IEA Demand LONDON: Oil fell to around $35 a barrel on Friday after the International Energy Agency cut sharply its forecast for world oil demand this year.

The IEA said in its monthly oil report that world oil demand would contract as the economic slowdown eroded consumption. The agency revised its estimate for 2009 demand down by 940,000 barrels per day (bpd) to 85.3 million bpd — a fall of more than 500,000 bpd year-on-year.

U.S. light crude for February delivery was down 30 cents at $35.10 a barrel by 9:45 a.m. British time, after hitting a low of $34.77. The contract, which expires on Tuesday, touched a low of $33.20 on Thursday, the weakest in nearly a month.

London Brent crude for March was up 7 cents at $47.75, maintaining an unusual premium to the U.S. benchmark due to the disruption of Russian gas supplies to Europe and growing U.S. stockpiles.

The price of oil for delivery in February has fallen about 14 percent so far this week, as a string of dismal figures from major economies stung investor confidence and portended further weakness in oil demand in months ahead.

“Global oil demand is reducing at an alarming rate,” said Rob Laughlin, senior oil analyst at MF Global in London.

“This latest report from the IEA is another warning shot across the bows to OPEC that supply is still outpacing demand and the situation is getting worse seemingly day by day.”

“Whilst OPEC is making an effort to adhere to quotas, the clear picture shows that another cut is required and soon.”