Oil Rises in London as IEA Maintains Global Demand Forecast
April 12, 2011, 8:47 AM EDTBy Sherry Su
April 12 (Bloomberg) -- Crude advanced in London as the International Energy Agency stood by its demand forecast and Libyan rebels rejected a cease-fire plan, damping optimism that the nation’s exports may be restored soon. Oil fell in New York.
Brent futures recovered from earlier losses after the IEA said global oil demand will rise 1.6 percent this year, even as it warned that crude prices above $100 a barrel are starting to hurt the global economy. In Libya, rebels turned down the African Union’s plan that would leave Muammar Qaddafi in power.
“Reports of strong demand have been in the public eye for quite a while, and that is keeping the uptrend going,” said Alexander Ridgers, head of commodities of CMC Markets in London. “I don’t think any new reports are changing the picture significantly.”
Brent oil for May settlement rose as much as 1.1 percent to $125.38 a barrel on the ICE Futures Europe exchange in London, after falling as much as 1.6 percent. The contract traded at $124.86 at 1:34 p.m. London time. Crude for May settlement on the New York Mercantile Exchange was at $109.67 a barrel, down 25 cents, after dropping $2.87 yesterday.
Worldwide oil consumption will rise by 1.4 million barrels a day this year to average 89.4 million a day, Paris-based IEA said today in its monthly Oil Market Report.
Still, preliminary data “already show signs of oil demand slowdown” and global supplies are starting to look “thin” as the Libyan conflict strains spare production capacity held by the Organization of Petroleum Exporting Countries, the IEA said.
‘Real Risks’
“There are real risks that a sustained $100-plus price environment will prove incompatible with the current expected pace of economic recovery,” according to the IEA report. “The surest remedy for high prices may ultimately prove to be high prices themselves.”
Barclays Capital said oil prices have yet to show any “considerable” impact on demand as the economic backdrop is different from 2008, when oil reached $148 in New York.
“While current prices will slowly initiate some reaction from the consumer end, particularly in the OECD, it is far too premature to signal that the first signs of demand destruction are already noticeable,” Amrita Sen, London-based analyst of Barclays Capital said in a research note.
Today’s monthly IEA report followed yesterday’s World Economic Outlook from the International Monetary Fund, which said the U.S. economy will expand at a slower pace than in 2010 amid an unemployment rate above 8 percent and a drop in consumer confidence. The threat of further oil-price increases has become a “key downside risk” for global growth, the IMF said.
Cease-Fire Plan
The U.S., the world’s largest economy and the biggest oil consumer, will expand 2.8 percent this year, down from 2.9 percent last year and a January forecast for 2011 of 3 percent, according to the IMF.
The IMF cut its Japanese growth forecast to 1.4 percent from 1.6 percent before, citing the nation’s March 11 earthquake and tsunami. Expansion in China, the world’s second-largest oil- consuming country, was projected at 9.6 percent this year, unchanged from the January estimate.
Libya’s rebels turned down an African Union cease-fire plan that would leave Qaddafi in power as Moussa Koussa, the ex- foreign minister who defected to the U.K., urged national unity and warned of civil war.
“Qaddafi and his sons must leave immediately if he wants to save himself,” the head of Libya’s rebel council, Mustafa Abdel Jalil, said after meeting the AU delegation in Benghazi yesterday, echoing the demands of the U.S., France and the U.K., who are supporting the insurgents with air strikes. Qaddafi’s forces maintained artillery fire against Misrata, as UNICEF warned that tens of thousands of children are at risk in the besieged western city.
U.S. Inventories
U.S. gasoline supplies probably fell for an eighth week as the longest stretch of declines since the summer of 2008 may signal higher prices at the pump, a Bloomberg survey showed.
Inventories of the motor fuel decreased 1 million barrels, or 0.5 percent, in the seven days ended April 8 from 216.7 million a week earlier, according to the median of 13 analyst estimates before an Energy Department report tomorrow.
Crude oil stockpiles increased 1 million barrels, or 0.3 percent, in the seven days ended April 1 from 357.7 million a week earlier, according to the survey. Supplies of distillate fuel, which includes heating oil and diesel, probably rose 500,000 barrels, or 0.3 percent, from 153.5 million.
--With assistance from Ben Sharples in Melbourne, Grant Smith in London, Christian Schmollinger in Singapore, and Maher Chmaytelli in Benghazi. Editors: John Buckley, Mike Anderson
To contact the reporter on this story: Sherry Su in London at lsu23@bloomberg.net.
To contact the editor responsible for this story: Steve Voss at sev@bloomberg.net.
