LONDON (AFP) – World oil prices fell on Wednesday, in line with tumbling global equity markets as investors set aside a positive International Energy Agency report on demand.
Brent North Sea crude for delivery in September sank 1.38 dollars to 78.22 dollars a barrel in late afternoon London trade.
New York’s main contract, light sweet crude for September, dropped 1.54 dollars to 78.71 dollars.
Wall Street stock prices nosedived on Wednesday in the wake of the Federal Reserve’s bleak economic forecast and new data showing the US trade deficit has widened.
The Dow Jones Industrial Average dropped 1.87 percent in opening trades, with Asian and European markets also down sharply after both the Fed and the Bank of England downgraded their economic outlooks, sparking deep concern over the global recovery, dealers said.
“Crude oil prices retreated below 80 dollars per barrel following losses in the global equity markets,” said Sucden analyst Myrto Sokou.
In Paris, the IEA said on Wednesday that it had raised its estimate for world oil demand this year by 80,000 barrels per day, and for next year by 50,000 bpd on the basis that the global economy grows 4.5 percent this year and 4.3 percent in 2011.
The revised figures mean total demand this year would rise 1.8 million bpd or 2.2 percent to 86.6 million bpd. It would then rise by 1.3 million bpd or 1.5 percent to 87.9 million bpd next year, according to the IEA.
“The IEA monthly report is likely to provide some support for crude oil prices,” Sokou said.
“It raised its forecast for global oil demand for 2010 and 2011 but said that if the global economy seems weaker than (first thought), then any potential rise in the oil consumption will be wiped out.”
Economic recovery is pushing up estimates of oil demand this year and next, but there are dangers to growth in advanced nations and some emerging countries, the IEA added.
The IEA is the oil strategy and monitoring arm of the 31-member Organisation for Economic Co-operation and Development
Later on Wednesday, all eyes will turn to the US Department of Energy’s weekly snapshot of American crude reserves in the world’s biggest energy-consuming nation.