Oil futures traded near their lowest in four days in London after the International Energy Agency cut demand estimates amid growing concern Greece will default on its debt. Brent pared earlier gains after the IEA, an adviser on energy policy to 28 nations, reduced its estimate of 2012 global oil demand by 400,000 barrels a day. Stock markets in Europe extended a two-year low. A report from the U.S. Energy Department tomorrow may show U.S. crude supplies fell for a second week as a result of storms in the Gulf of Mexico. “Demand growth has slowed,” David Fyfe, head of the IEA’s industry and markets division, said in a telephone interview from Paris. “This is a market that’s been tightening for the past 12 to 15 months. This year the tightening has been more about supply outages than demand.” Brent oil for October settlement was at $112.28 a barrel, 3 cents higher, on the London-based ICE Futures Europe Exchange as of 10:16 a.m. Earlier the contract gained as much as $1, or 0.9 percent, to $113.25 a barrel. Yesterday Brent fell to $110.42, the lowest since Sept. 6. Crude for October delivery was at $88.62 a barrel, up 43 cents, in electronic trading on the New York Mercantile Exchange after rising as much as $1.02 to $89.32 a barrel. Prices are 15 percent higher than a year ago. Brent Backwardation The European benchmark contract closed at a premium of $24.06 to U.S. futures yesterday, the smallest since Aug. 23 and down from a record close of $26.87 on Sept. 6. The spread is at $23.56 a barrel today. The October Brent contract is at a premium of $2.09 a barrel to the November future, the most since June 15. This market structure, where prompt supplies are more expensive than later deliveries, is known as backwardation and signals demand for near-term supplies is greater than for future shipments. German Chancellor Angela Merkel said that Greece is taking the right steps to get its next bailout payment, warning against allowing a Greek default because of the risk of contagion for other euro-area countries. The Paris-based IEA said that demand worldwide will rise by 1.2 percent to 89.3 million barrels a day this year, and by 1.6 percent to 90.7 million in 2012. The full resumption of exports from Libya will be “long and difficult,” it said. The Energy Department report may show U.S. crude inventories slid 3 million barrels last week, according to the median of 10 analyst estimates in a Bloomberg News survey. Gasoline supplies probably fell 500,000 barrels, the survey shows. The industry-funded American Petroleum Institute will report its own data today. Output in the Gulf of Mexico, which accounts for 27 percent of U.S. supply, was cut 61 percent last week after Tropical Storm Lee shut production platforms. To contact the reporters on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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