LONDON--Crude-oil futures turned negative in London trading Friday, paring early gains after the International Energy Agency became the third oil body this week to paint a bleak picture of future global demand.
The IEA lowered its 2012 oil demand growth forecast to 700,000 barrels a day, "basically half the oil demand growth they were expecting a year ago" according to a note from Petromatrix. Earlier in the week, similar gloomy predictions were made by the U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries.
Also Friday the IEA said it expects oil prices to ease over the next five years as global production capacity increases and economic malaise keeps demand growth sluggish, but it said ongoing geopolitical risks could cause some turbulence.
"A higher risk environment may allow elevated prices and relatively high spare capacity to coexist," the report said.
At 0945 GMT, the front-month November Brent contract on London's ICE futures exchange was down $1.00 at $114.71 a barrel.
The front-month November light, sweet crude contract on the New York Mercantile Exchange was trading 20 cents lower at $91.87 a barrel.
The price differential between the two contracts, known as the Brent-WTI spread, fell below $23 having moved to a year-to-date high of $23.64 Thursday. The two benchmarks are being subjected to different factors, with WTI restrained by a glut of U.S. oil and Brent underpinned by concerns over Middle East supply disruption and delays to North Sea crude loadings.
VTB Capital, in a note to clients, said the London market is "starting to look increasingly overbought" given the fundamental backdrop.
On the supply side, there is a certain element of risk premium priced-in to oil at the moment, amid concerns that the skirmishes on the Turkey-Syria border could spread into the wider region.
Thursday's price movements demonstrated how much the market is susceptible to the potential for supply disruptions, with unconfirmed reports of a pipeline explosion in Syria causing a jump in futures prices. Denis Gartman, publisher of The Gartman Letter, said it was "fascinating how swiftly and how violently crude oil rose" and fell on those reports.
The ICE's gasoil contract for November delivery was down $10.75 at $1,004.00 a metric ton, while Nymex gasoline for November delivery was down 510 points at 2.9046 cents a gallon.
