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Oil prices slumped more than 3.5 per cent yesterday after the International Energy Agency cut its forecast for world oil demand growth, saying the recent surge in crude prices had already hurt consumption.
The losses extended US crude's slide from last week's record US$98.62 ($129) to more than US$7 a barrel, as profit-taking, signs of a slowing economy, and signals the Organisation of Petroleum Exporting Countries may finally take action to cool the market-encouraged selling.
US light crude for December delivery settled down US$3.45, or 3.65 per cent, at US$91.17 a barrel, while London Brent crude fell US$3.15 to US$88.83 a barrel.
The sell-off from last week's record accelerated Tuesday after the IEA sharply reduced its forecast for oil demand growth through the rest of 2007 and into 2008, saying a price rally of around a third since mid-August was already slowing consumption.
"It's not surprising that oil prices are retreating. There's a bit of worry about demand in the US, which has suffered from the sub-prime crisis," said Lawrence Poole, an energy analyst at Global Insight, a consultancy in London.
The IEA, the adviser to 26 industrial consumer nations, cut its prediction for fourth-quarter demand growth by 570,000 barrels a day and by 180,000 bpd more for the first quarter.
"The recent dramatic price rise is having a 'short-term' shock effect, at the same time as consumers appear to be adapting behaviour to deal with steady annual price increases," the agency said in its monthly Oil Market Report.
Demand for oil in the US, the world's largest oil consumer, has already dropped 0.4 per cent from a year ago, according to the latest government data.
Crude oil imports by China, the world's second largest oil consumer, fell to a 10-month low in October, according to preliminary government data.
Saudi Oil Minister Ali al-Naimi said Opec would make no output decision at the group's summit meeting this week in Riyadh, despite pressure from consumer nations calling for another production hike to cool red-hot prices.
- Reuters
