Oil Falls After IEA Cuts Global Demand Forecast

Oil fell after the International Energy Agency reduced its forecast for global demand, saying slower economic growth may limit fuel consumption.

Prices declined 21 cents after the IEA cut the outlooks for 2012 and 2013 by 100,000 barrels a day each from a month earlier. Economic expansion isn’t happening fast enough to curb unemployment, International Monetary Fund Managing Director Christine Lagarde said today. U.S. oil production advanced to a 17-year high last week.

“There is recognition here that the global economy is not growing at a robust pace and it’s going to limit oil demand,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “In contrast, supply is growing at a somewhat faster pace. As long as you have supply growing faster than demand, then that’s going to put downward pressure on prices.”

Crude for November delivery settled at $91.86 a barrel on the New York Mercantile Exchange. Prices gained 2.2 percent this week, in the first advance in four weeks. Futures are down 7.1 percent this year.

Brent for November settlement fell $1.09, or 0.9 percent, to end the session at $114.62 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude’s premium to New York futures narrowed to $22.76 a barrel, down from yesterday’s $23.64, the biggest gap since October 2011.

The IEA forecast world oil demand of 89.7 million barrels a day this year and 90.5 million in 2013.

Oil Demand

“The IEA suggests oil demand is basically going to be unchanged and that’s not going to lend support to the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The more-than-ample supply we have here is preventing oil from breaking off.”

The Paris-based agency also said global markets will become better supplied in the next five years as demand growth slows and production rises in North America and the Middle East.

Worldwide fuel consumption is projected to rise to 95.7 million barrels a day in 2017 from 89 million last year, the IEA said. Output is forecast to advance about 1.5 million barrels a day each year to 102 million barrels a day in the same period.

The Energy Department reported yesterday that U.S. crude supplies rose 1.67 million barrels to 366.4 million last week, 8.5 percent higher than a year earlier. Production increased to 6.6 million barrels a day, the most since May 1995. Gasoline demand fell in the four-week period ended Oct. 5.

Growth ‘Tepid’

Growth in advanced economies is “tepid,’ Lagarde said in an interview with the British Broadcasting Corp. in Tokyo. The two main areas of uncertainty are the euro region and the U.S., she said.

The IMF on Oct. 9 said the world economy will grow 3.3 percent this year, the slowest pace since the 2009 recession, and 3.6 percent next year. That compares with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The IMF forecast was incorporated into the IEA’s assessment, the IEA said.

Oil also declined as U.S. stocks retreated. The Standard & Poor’s 500 Index dropped as much as 0.5 percent after gaining 0.4 percent earlier.

‘‘The stock market is underpinning the oil market,” McGillian said.

Oil may decline next week, a Bloomberg survey showed. Sixteen of 35 analysts, or 46 percent, forecast crude will decrease through Oct. 19. Nine respondents, or 26 percent, predicted a gain and 10 forecast little change.

Oil rose earlier as increasing Middle East tension prompted concern that supplies will be disrupted and as U.S. consumer confidence unexpectedly jumped.

Syria Sanctions

European Union nations reached a preliminary decision to tighten sanctions on Syria, two EU officials said. The Thomson Reuters/University of Michigan preliminary October consumer sentiment index rose to a five-year high.

“Tension in the Middle East is definitely a factor that should keep oil above the $85-to-$90 level,” said Chris Barber, a senior analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. “The consumer confidence number is going to support the up trend.”

Electronic trading volume on the Nymex was 348,568 contracts as of 3:45 p.m. Volume totaled 652,165 contracts yesterday, 24 percent above the three-month average. Open interest was 1.57 million.

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