Forecasters point to subdued oil demand growth

Two of the three most closely watched oil forecasters — the International Energy Agency and US government’s Energy Information Administration - lowered global oil demand growth forecasts this week. The third, Opec, flagged downside risks to the outlook.

Brent crude gained 36 cents to $108.88 a barrel by 1017 GMT. The global benchmark fell for the last four sessions. US oil gained 17 cents to $92.69, after sliding to $92.18.

“The IEA’s report noted a subdued rate of growth in demand and that is probably weighing,” said Natalie Rampono, commodity strategist at ANZ in Melbourne. “But what the market is trying to focus on is China’s tightening policy. A lot of people have been pricing in a strong pick-up in oil demand from China this year and some of those expectations may be pared back.”

Comments by China’s central bank on stabilising inflation expectations reinforced concern it may drop its pro-growth policy before economic expansion gathers full momentum. The remarks pressured oil and most other markets in Asia.

Supply concerns have taken a back seat for now. US crude stockpiles rose last week, a government report said on Wednesday, and Opec production is expected to trend higher in coming months as Saudi Arabia adds to supplies.

Opec’s top producer cut back its output sharply in the last two months of 2012 because of factors including weaker Asian demand and a lower domestic need for crude in power plants.

“These factors will likely reverse heading into the summer,” Morgan Stanley said in a report. “Coupled with other sources of demand, both seasonal and exogenous, we anticipate demand for Saudi crude will begin to increase in 2Q13 by up to 500,000-700,000 barrels per day.”

Oil was also under pressure from a stronger US dollar, which was near a seven-month high against a basket of currencies on Thursday. A stronger dollar can make oil more expensive for other currency holders.

WTI futures climbed as much as 0.5 per cent in New York, while Brent was little changed in London. The differential between the two grades shrank after an Energy Department report yesterday showed supplies at Cushing, Oklahoma, the delivery point for Nymex futures, fell the most since May 2011. Total US crude stockpiles climbed to the highest for the time of year in records dating back to 1982.

“We have a repeat of yesterday where we are starting the session bouncing from a relatively low level,” Ole Hansen, the head of commodity strategy at Saxo Bank A/S, said today by telephone from Copenhagen. “This morning we are having a little bit of a bounce, but lots of the focus is on the spread between the two crude varieties which has come down to $16.”

WTI for April delivery rose as much as 50 cents to $93.02 a barrel in electronic trading on the New York Mercantile Exchange and was at $92.73 at 9:33 am London time. The volume of all futures traded was little changed from the 100-day average. The contract lost 2 cents yesterday after climbing to $92.54 on March 12, the highest settlement since February 27.