Oil fell for a second day because of concern fuel demand will slow after the International Monetary Fund cut its U.S. and Japan growth forecasts, saying high crude prices pose a risk to global economic expansion. Futures headed for their biggest two-day drop in almost five months after the IMF said in its World Economic Outlook that the U.S. economy will expand at a slower pace than in 2010 amid an unemployment rate above 8 percent and a drop in consumer confidence. Oil also slipped as the African Union tried to negotiate a cease-fire in Libya and Nigeria prepared for a presidential election after violent clashes since July. “The market is starting to be concerned over demand destruction due to higher fuel prices,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note. “Markets will be keeping a close eye on a potential Libyan cease-fire and election developments in Nigeria.” Oil for May delivery slid as much as $2.05, or 1.9 percent, to $107.87 a barrel, in electronic trading on the New York Mercantile Exchange, and was at $108.64 at 2:37 p.m. Singapore time. Yesterday, the contract fell $2.87, or 2.5 percent, to $109.92, bringing the two-day decline to as much as 4.1 percent, the most since Nov. 17. The threat of further oil-price increases has become a “key downside risk” for global growth, according to the IMF report. Oil will rise 36 percent in 2011 to $107.16 a barrel, based on the average prices of U.K. Brent, Dubai and West Texas Intermediate crudes, the IMF said. The January forecast was for oil at $89.50 a barrel this year. Brent Falls Brent oil for May settlement dropped as much as $2.01, or 1.6 percent, to $121.97 a barrel on the ICE Futures Europe exchange in London. Yesterday, the contract fell $2.67, or 2.1 percent, to end the session at $123.98. The European benchmark traded at a premium of $14.06 a barrel to U.S. futures yesterday. The difference between front- month contracts in London and New York surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing, Oklahoma, the delivery point for New York futures. The spread averaged 76 cents last year. The U.S., the world’s largest economy and the biggest oil consumer, will expand 2.8 percent this year, down from 2.9 percent last year and compared with a 3 percent growth rate for 2011 forecast in January, according to the IMF. The Conference Board reported consumer confidence dropped to a three-month low in March, and the jobless rate was 8.8 percent in Labor Department statistics. Japan, China Japanese growth was cut to 1.4 percent from 1.6 percent in the previous forecast after the nation’s March 11 earthquake and tsunami, the IMF said yesterday. Expansion in China, the world’s second-largest oil-consuming country, was projected at 9.6 percent this year, unchanged from the January estimate. The African Union said in a statement yesterday that Libyan leader Muammar Qaddafi agreed to “the immediate cessation of all hostilities” and to negotiations “with the view to adopting and implementing the political reforms necessary for the elimination of the causes of the current crisis.” Libyan rebels rejected the plan because it doesn’t meet their demand that Qaddafi gives up power. Some of the risk that prices will advance may be waning amid “nascent signs of oil demand destruction” in the U.S. as well as a record number of bets that prices will rise, elections in Nigeria and the potential Libyan cease-fire, according to a report by Goldman Sachs Group Inc. analysts led by Jeffrey Currie in London. U.S. Inventories U.S. gasoline supplies probably fell for an eighth week as the longest stretch of declines since the summer of 2008 may signal higher prices at the pump, a Bloomberg News survey showed. Inventories of the motor fuel decreased 1 million barrels, or 0.5 percent, in the seven days ended April 8 from 216.7 million a week earlier, according to the median of 13 analyst estimates before an Energy Department report tomorrow. Crude oil stockpiles increased 1 million barrels, or 0.3 percent, in the seven days ended April 1 from 357.7 million a week earlier, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably increased 500,000 barrels, or 0.3 percent, from 153.5 million the prior week. To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net

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