LONDON — Brent crude oil steadied below $106 a barrel on Thursday, not far above an eight-month low, after US crude oil stocks hit their highest level in more than two decades and analysts cut forecasts for global oil demand growth.
Disappointing economic growth in the US and several developing economies as well as deep recession in parts of Europe have eroded demand for fuel at a time when oil output has been increasing quickly, particularly in North America.
Surplus oil is filling inventories worldwide and US stocks are now higher than at any point since 1990, data show.
The West’s energy watchdog on Thursday cut its forecast for global oil demand growth this year by 25,000 barrels a day (bpd), becoming the third of the big energy forecasters to paint a more bearish picture of the market outlook.
"A slightly weaker demand trend is forecast," the International Energy Agency (IEA), which advises industrialised countries on energy policy, said in its monthly report.
The US government’s Energy Information Administration (EIA) and the Organisation of the Petroleum Exporting Countries this week both also lowered forecasts for demand growth.
"Markets are well supplied," said Olivier Jakob, managing director of energy consultancy Petromatrix in Zug, Switzerland.
Jonathan Barratt, chief executive of commodity research firm BarrattBulletin, agreed: "Everyone is readjusting their portfolio for weaker demand and we’re also seeing significant revision of demand forecasts.
"Prices will fundamentally remain under pressure," he said.
Brent futures were unchanged at $105.79 a barrel by 10.40am GMT. They dropped to a low of $103.40 on Monday, the weakest since July. US crude futures fell 10c to 94.54 a barrel.
Demand concerns
The IEA said it expected world oil demand to rise by 795,000 bpd this year, 25,000 bpd less than predicted last month, due to weaker-than-expected oil use in developed economies, particularly Europe and Japan, as well as Russia and India.
The lower forecasts stoked concerns over the strength of economic recovery.
Those fears have been highlighted by data last week showing US employers hired far fewer staff in March than even the gloomiest predictions, and business surveys from the eurozone confirming recession there was dragging on.
US crude oil inventories rose to the third-highest level on record last week, data released by the EIA showed on Wednesday.
"Crude builds should be expected at this time of year when refinery maintenance is seasonally elevated, resulting in suppressed crude use at refineries," BNP Paribas analysts said in a report. "But the situation has been made worse by continuing strong growth in domestic crude supply."
Oil could be supported by geopolitical tensions as North Korea appeared to be close to launching a medium-range missile in a show of strength, a move that is seen as a threat by neighbour South Korea and its ally the US.
Tension also remains high between Iran and the West over the Islamic Republic’s nuclear programme, which Tehran says is for electricity generation but Washington fears is designed to produce an atomic bomb.
Traders fear open hostilities between Iran and the United States could disrupt oil supplies from the Middle East Gulf.
