Font Size

- Aa +

Mon 13 Apr 2009 01:42 PM

Font Size

- Aa +

Oil falls below $52 after IEA cuts demand view

Investors react to IEA's estimate that world oil demand will fall by 2.4m bpd this year.

Oil fell to around $51 a barrel on Monday after the International Energy Agency cut its forecast for oil demand, overshadowing data showing Chinese crude imports rose to their second highest ever.The IEA said on Friday that world oil demand will fall by 2.4 million barrels per day (bpd) this year and said developed countries' oil inventories in February rose to their highest since 1993.

"The IEA has revised demand down by 1 million bpd and stocks are still very high," said Olivier Jakob, analyst at Petromatrix, of oil's decline. "Overall, we need to see some stockdraws."

US crude fell $1.24 to $51.00 by 03.00pm, UAE time on Monday, the first day of trade since Thursday's nearly six percent gain on the back of a rally on Wall Street. ICE Brent crude fell $1.11 to $52.95.

Dealers will be looking this week for confirmation of the demand outlook. The US Energy Information Administration will release its short-term energy outlook on Tuesday, while OPEC publishes its monthly view on Wednesday.

At the same time, however, preliminary Chinese trade data on Friday showed crude oil imports rose by more than a quarter versus February to the highest in a year in March and were just short of a record.

And China's industrial output growth picked up to 8.3 percent in March from a record low of 3.8 percent in the first two months of the year, Premier Wen Jiabao said.

Oil has recovered to a $47-$54 range for the past four weeks from a low of $32.40 in December. But it is still down almost $100 from a record high above $147 last summer.

News that Saudi Arabia would trim oil supplies to some of its Asian customers and one European buyer also limited the downside, suggesting the world's top exporter remains concerned about high inventories.

The IEA said inventories in developed countries rose to 61.6 days of forward demand cover in February, the highest since 1993 and far above the roughly 52 days cover that many in OPEC consider comfortable.

OPEC has already agreed to cut oil output since September by a total of 4.2 million bpd, or about 5 percent of world supply. It is estimated to have delivered about 80 percent of those cutbacks.

Iran's OPEC governor Mohammad Ali Khatibi said if oil demand continued to drop the group may decide to further reduce its oil output, the Iranian newspaper Hamshahri on Monday quoted him as saying.

Also adding support was news that Royal Dutch Shell said on Sunday it had shut down flowstations feeding into its Trans-Niger oil pipeline in southern Nigeria.

For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.