Oil prices fall on demand concerns

Oil prices fell today as weak US economic data stoked worries about demand, and the International Energy Agency suggested members could release emergency stockpiles if producers did not increase supply.

The price retreat cut short yesterday's rebound from sharp losses of about $US20 a barrel in two weeks that traders and analysts had called overdone.

The downturn, part of a broad decline for commodities, came a session after the sector had posted its biggest daily rise in two months.

The 19-commodity Reuters-Jefferies CRB index, a globl benchmark for commodities, was down 1%, heading for its largest loss in a week.

US crude for June delivery traded $US1.43 lower at $US98.67 barrel.

In London, ICE Brent for July delivery dropped 76 cents to $US111.54.

IEA urges producers to raise supply

Concerned that high oil prices would dent the fragile global economic recovery, the Paris-based International Energy Agency urged oil producers to boost supply to cut fuel costs.

IEA, a watchdog group for 28 industrialised nations, suggested its members could release emergency stockpiles if OPEC failed to act.

The IEA statement, issued after its governing board met, was an unusual comment on producer policies, analysts said. The statement came ahead of OPEC's next policy meeting on June 8.

The 12-member Organization of the Petroleum Exporting Countries maintains that world oil supplies are adequate.

"The IEA is part of the equation today. Investors have to be saying to themselves, 'hey, they could be serious about pulling the trigger on reserves'," said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.

John Lipsky, IMF acting Managing Director, said the global recovery remained fragile and urged continued international support for shaky economies in Europe, where the debt crisis has also fed worries about energy demand.

Yesterday, oil prices rebounded after losing two straight days as buyers emerged to scoop up bargains, following the recent sharp decline in prices.

An unexpected drop in US crude oil inventories last week and a large drop in stockpiles at the key Cushing, Oklahoma, delivery point for the US oil futures contract further supported yesterday's rally.

Source.