NEW YORK (Dow Jones)
Crude oil futures prices settled 1.9% lower Tuesday on fresh worries over a potential slowdown in global oil demand.
A day after Chinese Premier Wen Jiabao said the government was targeting 7.5% growth this year compared with 8% growth targets for each of the past seven years, data from Europe show a further economic slowdown.
The Energy Information Administration, in its monthly short-term outlook, trimmed its growth projections for 2012 and 2013. U.S. demand will slip to a 15-year low of 18.77 million barrels a day this year, the EIA said. A month ago, slim growth of 0.2% was forecast for the world's biggest oil consumer.
The decline comes as U.S. refiners will pay record high annual prices for crude oil supplies and consumers face record high annual average retail prices for gasoline and diesel fuel, the EIA said.
In China, the engine of growth for global oil demand and the second-biggest oil consumer behind the U.S., the forecast was scaled back for this year and next. China's oil demand will grow 4.5% this year and 4.6% in 2013, the EIA said, but down from February growth forecasts of 5.4% and 6.3%, respectively. As China's rate slows, so does total global demand. The EIA now projects demand will grow 1.2% this year and 1.5% in 2013, down from 1.5% and 2%, respectively, in the month-earlier outlook.
"The market has been backing away from these recent nine-month highs that we were seeing on the economic uncertainty," said Gene McGillian, analyst and broker at Tradition Energy in Stamford, Conn.
Light, sweet crude oil for April delivery on the New York Mercantile Exchange settled $2.02 lower at $104.70 a barrel, the lowest price since Feb. 17. After topping $110.50 last Thursday on a rumor -- later denied -- of an explosion at a Saudi Arabian oil pipeline, traders said prices are holding at a pivotal level, awaiting direction from weekly U.S. oil inventory data.
ICE North Sea Brent crude for April settled $1.82 lower at $121.98 a barrel.
The EIA data, due at 10:30 a.m. EST Wednesday, is expected to show U.S. crude oil inventories rose by 1.1 million barrels in the week ended March 2, while refinery operations dipped by 0.1 percentage point.
Gasoline stocks are expected to drop by 1.4 million barrels, while distillate stocks, comprising heating oil and diesel fuel, also are expected to fall by 1.4 million barrels.
Europe was a nest of concern for traders Tuesday. Fresh data showed fourth-quarter combined gross domestic product for the 17 nations in the euro zone fell 0.3% in the final three months of 2011, stunting potential for a recovery in oil demand in the region. Meanwhile, market nerves were on edge as the Greece debt issue returns to the forefront.
Greece's private-sector investors have until Thursday evening to decide whether to accept a deal that would see them write down 53.5% of their existing Greek debt holdings in exchange for new bonds. If fewer than 67% of bondholders participate, there could be a disorderly Greek default this month, with hefty bond repayments due later in March. A successful swap is needed to ensure Greece receives its second bailout and avoids default.
Cooling recent rhetoric, Iran's promise to give U.N. nuclear inspectors access to a key site in the ongoing dispute with the West over Iran's nuclear intentions also inspired some sellers. Also, a six-nation group of France, Germany, the U.K., the U.S., Russia and China said it is ready for fresh talks with Iran.
Iran said Tuesday it is ready to give the U.N. nuclear agency access to its Parchin military base once agreement is reached on how to proceed on clarifying all issues. The International Atomic Energy Agency said in November that it suspected Iran had carried out high-explosives tests in a large metal container at Parchin near Tehran, relevant to developing nuclear weapons.
U.S. President Barack Obama, meanwhile, said sanctions on Iran have been "crippling" and criticized Republican presidential candidates for casual talk about war with Iran.
Western sanctions led by the U.S. and Europe are aimed at steering oil buyers away from Iran and have helped stoke a $15-a-barrel fear premium in oil prices. Iran has threatened to cut supplies to all European buyers and, at times, has warned it could block oil flow from the Strait of Hormuz, the vital channel for one-fifth of the world's oil exports.
April reformulated gasoline blendstock futures settled 2.81 cents lower, at $3.2299 a gallon, while heating oil for April delivery was 2.92 cents lower at $3.1882 a gallon. RBOB gasoline futures have dropped 3.6% from March 1, when they hit their highest price since late April 2011. Still, at current levels, prices suggest a coming retail price of around $3.93 a gallon, compared with the Monday's national average of $3.793, as reported by the EIA, the highest level since late May 2011, when the Memorial Day holiday kicks off the summer driving season. The EIA sees retail prices in May hitting a monthly peak for the year at $3.96 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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