Crude Lower After IEA Cuts Demand Outlook
Crude-oil futures ended lower Tuesday after the International Energy Agency lowered its forecast for global oil demand through the end of the year and said economic weakness could pressure demand next year.
The Paris-based energy watchdog said it expects demand to fall by nearly 300,000 barrels a day in the last three months of 2012 and kept its 2013 forecast for oil-demand growth unchanged. The group, which represents major energy-consuming nations, warned that demand could weaken due to economic problems in Europe and budget negotiations in the U.S.
Light, sweet crude for December delivery settled lower by 19 cents, or 0.2%, at $85.38 a barrel on the New York Mercantile Exchange. It fell as low as $84.57 a barrel earlier in the session. A rebound in U.S. equities helped pull oil back from Tuesday's lows.
Brent crude on the ICE futures exchange fell 81 cents to $108.26 a barrel.
Early Tuesday, a reading of German economic expectations fell from last month, while Monday's Eurogroup meeting didn't show any progress on Greece's debt crisis, generating new concerns about how Europe's economic turmoil will weigh on the global energy market. The IEA's gloomy outlook provided an additional reason to sell, said analysts and traders.
"It's definitely a headwind for the market," said Rich Ilczyszyn, chief market strategist at iiTrader, a Chicago futures brokerage. He said that the looming debate over the U.S. budget has also made him cautious.
"Nobody wants to put on a big position with the fiscal cliff imminent," he said. "I don't want to risk my year coming into the last couple of weeks of trading."
Since reaching a high of $99 a barrel in September, oil prices have tumbled due to reports of ample global crude supplies and weakening fuel demand.
Europe is teetering close to recession, and China's growth has slowed. Meanwhile, a combination of tax increases and budget cuts in the U.S. scheduled to begin next year could send the world's largest economy back into recession unless the White House and Republican leaders reach a deal.
On Tuesday, the IEA said oil demand may suffer in the world's richest industrialized nations. The group had already cut estimates for global oil demand in the fourth quarter by 850,000 barrels a day since June.
Traders were also looking ahead to weekly data on U.S. oil and fuel stockpiles. Early forecasts are calling for a 1.5-million-barrel increase in oil inventories. Gasoline stocks are expected to rise by 200,000 barrels, while stocks of distillate, which include heating oil and diesel, are seen falling by 500,000 barrels.
"The inventory reports have been bearish, and they are going to continue to be bearish," said Tariq Zahir, managing partner and oil trader at Tyche Capital Advisors.
Front-month December reformulated gasoline blendstock, or RBOB, settled 2.25 cents lower at $2.6538 a gallon. December heating oil settled 3.84 cents, or 1.3%, lower at $2.9608 a gallon.
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