Oil Prices Close Above $110; IEA Cuts Demand Forecast
Oil prices steadied on Friday as supply concerns and the weak dollar countered expectations that growing economic problems will slow global demand this year.
The International Energy Agency, advisor to 27 industrial countries, slashed its 2008 global oil-consumption forecast by 460,000 barrels per day to 1.27 million bpd, the single biggest reduction since 2001.
The IEA report helped push U.S. light crude down in early activity, before late short-covering eroded the losses. U.S. crude settled up 3 cents at $110.14 a barrel, down from the record $112.21 struck on Wednesday.
London Brent crude rose 55 cents to $108.75 a barrel.
The U.S. dollar fell against yen and other currencies after a report showed U.S. consumer confidence dropped to its lowest level in 26 years.
The weak dollar has drawn many investors to dollar-denominated commodities as a hedge against inflation, and helped push oil to a record $112.21 on Wednesday.
The growing credit crunch as well as high energy costs and the U.S. housing crisis prompted the IEA to revise downward its its estimate of global oil demand.
Expected demand from OPEC member nations accounted for 320,000 bpd of the IEA's reduction for the year.
"I think it's no surprise. As the United States has still the largest appetite for oil, with a slowdown in the economy demand would slow here," said Mike Zarembski, senior commodities analyst for optionsXpress in Chicago.
Signs of more resilient demand in Asia and the Middle East should keep prices from tumbling too far, however, he added.
Data showed China's March crude-oil imports rose by a quarter from a year ago to a record high 17.3 million tonnes.
TheIEA also trimmed its supply forecast from producers outside of the Organization of Petroleum Exporting Countries, while OPEC members have reiterated plans to maintain output levels despite pleas from consumers for more oil to help lower prices.
Ali al-Naimi, oil minister for top OPEC producer Saudi Arabia, said on Thursday the markets were well supplied and did not need more crude.
A Saudi oil source told Reuters on Friday the kingdom had cut production to around 9 million bpd, slightly less than the 9.2 million bpd it had been pumping before, to reflect lower customer demand.