Oil Price Update-IEA Reduces Projected Growth in Oil Demand, Futures Decline

Oil futures declined on the back of signs that the high oil prices were eating into the global demand of oil and were also affecting the recovery of the global economy. WTI crude futures fell by 0.37 percent to USD $ 98.60 a barrel, while Brent futures decreased by 0.02 percent to USD $ 112.96 a barrel.

The International Energy Agency (IEA) revised its forecast for the projected growth in the demand of oil in 2011 downwards on the strength of weaker IMF GDP projections for advanced economies. The projected growth has declined by 0.2 percent to 1.3 mb/d, with the average daily demand of oil in 2011 projected at 89.2 mb/d. This revision has cemented fears that had been rampant in certain quarters about the demand of oil getting adversely affected by the high oil prices prevalent for a considerable amount of time.

The decline in WTI futures can also be attributed to speculations that contrary to yesterday’s fears, flooding in the Mississippi River may not adversely affect oil production in the 11 refineries located near the river. This has eased fears about possible supply disruptions, hence leading to a decrease in the oil futures.