Oil prices fell on Tuesday under the shadow of the looming US “fiscal cliff” and ongoing eurozone debt crisis, and after the International Energy Agency cut its global demand forecasts for crude.
In late morning London deals, Brent North Sea crude for delivery in December fell 96 cents to $108.11 a barrel.
New York’s main contract, light sweet crude for December or West Texas Intermediate (WTI), dropped 65 cents to $84.92 a barrel.
“The oil market is falling on fears of slowing growth and the possibility of going off the fiscal cliff,” said Phil Flynn, energy analyst at 321energy.
Rival US politicians must reach a deal to avoid the imposition of deep spending cuts and huge tax hikes on January 1 and which observers say would tip the country back into recession — and dent energy demand in the world’s top oil consuming nation.
There were also European debt fears as Eurogroup head Jean-Claude Juncker said Monday that Greece had made progress on its debt bailout targets but regional finance ministers will have to meet again on November 20 to clear the way for its next aid tranche.
“Crude oil prices extended losses and retreated further on Tuesday, tracking losses in the global equity markets as raising concerns about eurozone economic stability,” said Sucden brokers analyst Myrto Sokou.
“The release of the US Fed budget details could provide an interesting insight about the US economic prospects, giving some clear momentum to the oil market,” she added.
Sentiment was also hit by growing fears that the eurozone sovereign debt crisis could propel Germany into recession, following news that investor sentiment in the bloc’s biggest economy has dropped unexpectedly.
The widely watched index of investor confidence compiled by the ZEW economic institute fell to minus 15.7 points in November from minus 11.5 in October.
Investor gloom spread after the International Energy Agency — which represents oil consuming countries — predicted that global demand will have increased by 670,000 barrels per day (bpd) in 2012 to 89.6 mbpd. This was 60,000 bpd less than assumed a month ago.
For 2013, the Paris-based IEA also slashed its demand forecast by 100,000 bpd to a rise of 830,000 bpd to reach 90.4 mbd, in its latest monthly report.
The agency said that the downward revisions were mainly owing to sluggish economies in developed countries and the knock-on effects of Hurricane Sandy which wrought havoc on the US eastern seabord three weeks ago.
Sandy was expected to have slashed US demand by 230,000 barrels per day in October, as people curtailed travel and product deliveries were impeded.
Despite recent losses, oil prices remain at elevated levels close to $110 per barrel in London.
OPEC Secretary-General Abdullah El-Badri, speaking at a conference in London on Tuesday, blamed speculators for stubbornly high prices.
“There is no shortage of oil anywhere in the world, stocks are very high (and) OPEC has strong spare capacities,” El-Badri told delegates at the Oil & Money industry event.
“The market is very well supplied. There is no doubt about it, so I don’t understand why we have these high prices. Speculation is the problem.
“Speculation is part of the market, you can’t eliminate it. It’s not in our interest to see world economy damaged by high oil prices,” he added.
The Organization of Petroleum Exporting Countries, which supplies about one third of global oil, will hold its regular production meeting in Vienna next month.
The powerful 12-nation cartel was also expected to elect its new secretary general to replace Libyan El-Badri at the gathering on December 12.