Oil futures hit a new closing high in London on Friday as a forecast of slower growth in worldwide crude demand did little to ease speculative fervor.
Analysts said the International Energy Agency’s (IEA) forecast of a “dramatic” slowing of the US economy that would curb energy demand failed to dent prices. Instead, traders looked to oil amid turmoil in stock markets after a weak outlook from General Electric.
In London, Brent North Sea crude for May firmed US$0.55 to a settlement high of US$108.75 per barrel, after striking a historic US$109.98 on Thursday.
New York’s main oil contract, light sweet crude for delivery in May, fell US$0.02 to close at US$110.14 a barrel. The contract had rocketed to a record US$112.21 on Wednesday.
The IEA warning came in a week in which the US government announced heavy falls to its energy stockpiles, news that sent crude futures soaring.
In its monthly report on trends in the energy market, the IEA revised down “significantly” its estimate for global demand for oil this year to 87.2 million barrels per day, a reduction of 310,000 barrels per day from the estimate in last month’s report.
Still, the market showed little reaction.
“Oil’s long bullish odyssey continues and seems like it wants to continue despite the fact there are ominous signs that demand in the good old gas guzzling US of A is continuing to slow and slow dramatically,” Phil Flynn at Alaron Trading said.
“Despite this gloomy oil demand outlook, the market is assuming either that the demand destruction in the US will be short-lived or demand in the rest of the world will stay strong enough to not make a difference to the unrelenting bullish trend,” Flynn said.
The IEA’s oil demand growth forecast for 2008 was cut from two percent last month to 1.5 percent this month, noted Sucden analyst Nimit Khamar. “This goes to show how the whole mechanics of the oil markets have changed, as market participants are ignoring the fundamentals of supply and demand and are instead plowing money into the oil markets in search for better returns and as a means of hedging against inflation and their dollar exposure,” he said.
John Kilduff at MF Global said even if demand weakens in the US, growth in China may take up the slack.
The market has so far been able to limit concerns over slow oil demand due to resiliency in demand from China,” he said. “In fact, China imported a record amount of crude oil in March, up 25 percent from a year ago, and this news helped to underpin oil prices overnight.”
Crude futures were boosted on Wednesday after the US Department of Energy reported that US energy stockpiles fell across the board during the week ending April 4.
US crude reserves slumped by 3.2 million barrels and gasoline inventories shed 3.4 million barrels, the department said. Both falls were higher than market expectations.
Traders are focused on supplies of gasoline ahead of peak demand in the US driving season, starting next month, when many Americans hit the roads for their holidays.
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