Oil prices steadied on Wednesday following a sharp reversal in Tuesday’s session as traders digested the latest gloomy demand forecasts from the International Energy Agency, the energy watchdog of the developed world.
ICE March Brent traded 10 cents higher at $44.71 while Nymex March West Texas Intermediate remained below the $38 a barrel level, gaining 25 cents at $37.80 a barrel.
The IEA warned global oil demand would fall this year at the fastest rate since 1982 with a drop of 980,000 barrels a day to average 84.7m b/d due to the steep downturn in the world economy.
The fall in demand expected this year has almost doubled compared with the forecast made in January by the IEA for a decline of 500,000 b/d this year.
The IEA said US fuel demand had “plummeted” and warned that China, the powerhouse behind global growth until 2007, would see consumption growth slow markedly.
Chinese data released on Wednesday showed a larger-than-expected fall in crude imports in January, down 8 per cent to 3.02m b/d.
Analysts at Goldman Sachs cautioned that all of the trade data was affected by Chinese New Year effects, which resulted in only 17 working days in January 2009, compared with 22 working days in January 2008.
However, Gordon Kwan, head of China Energy Research with CLSA said: “The data is consistent with the anecdotal evidences of factory shutdowns that we have observed in the past few months.” Mr Kwan warned: “Another weak number is expected in February.”
Gold extended its push above the $900 level, rising to $925 a troy ounce and trading in a range between a low of $911.90 and a high of $926.90 after ending trading in new York on Tuesday at $916.25. Gold rallied as investors looked for a safe haven after the US stock market fell sharply on Tuesday in reaction to the revamped plans to stabilise the US banking system announced by the US Treasury.
James Steel, precious metals analyst at HSBC said two important but contradictory forces were at work in the gold market.
Mr Steel said safe haven buying and robust demand for gold exchange traded funds, coins, small bars, and other bullion investment products, was proof of strong investor demand.
But HSBC also noted that jewellery demand was demonstrably weaker in both emerging and advanced economies, with gold imports almost “non-existent” in India, the world’s largest jewellery market.
“The seriousness of the financial situation could encourage enough safe haven buying to propel gold to $950 an ounce or even higher in the near term, said Mr Steel: “But the accumulation of gold bullion normally going into the jewellery market and the lack of inflation globally will eventually work against gold price.”
