Crude oil declines after IEA cuts 2011 demand forecast on prices

Oil declined in New York after the International Energy Agency (IEA) trimmed its 2011 global oil demand forecast for the first time as this year’s price rally begins to weigh on consumption.

Crude fell as much as 3 per cent after the Paris-based advisor cut its estimate for worldwide fuel consumption by 190,000 barrels a day, or 0.2 per cent. US demand for gasoline will drop this year as pump prices compel motorists to drive less during the summer months, the IEA said today in its monthly market report. US crude inventories rose to a two-year high.

“The IEA cut reinforces the views around slowing global economic performance,” said Paul Harris, head of natural resources risk management at Bank of Ireland in Dublin.

 

Oil for June delivery on the New York Mercantile Exchange fell as much as $2.96 to $95.25 a barrel and was at $96.10 at 1.03 pm London time. Brent for June settlement was down $1.63 at $110.94 a barrel on the ICE Futures Europe exchange in London. Prices extended their declines after China raised banks’ reserve requirements for the fifth time this year to restrain prices, adding to the likelihood that growth will slow in the world’s second-biggest economy.