IEA Says Oil Prices Could Fall Further

PARIS — Crude oil prices could fall further from this month's record high of $100 per barrel because of weakness in the U.S. economy, the International Energy Agency said Wednesday.

Still, rising demand in China, tensions in Nigeria and the Middle East, and falling oil stocks remain "supportive factors" for prices, the Paris-based agency said in its monthly oil market report.

A "rapid retreat" in crude oil prices from the $100 mark earlier this month shows "how volatile markets remain and, in early 2008, there would appear to be some downside potential," the report said.

Light, sweet crude for February delivery fell $2.30 to settle at $91.90 a barrel on Tuesday _ down from the record high of $100.09 a barrel on Jan. 3. By midday Wednesday, the contract was down another $1.72 to $90.18 a barrel after sinking as low as $89.26 earlier. It was the first time since Dec. 19 the price of crude fell below $90.

World oil demand is expected to rise by 2.3 percent this year to 87.8 million barrels per day, the IEA said, which represents a slight cut from last month's prediction that demand would rise by 2.5 percent this year. The agency added that its forecast could change further if the economic slowdown in the U.S. _ a major oil consumer _ worsens. Weakening U.S. demand would only be "partially" offset by strong economic growth in China and the Middle East, the report said.

However, the IEA said its preliminary figures showed U.S. demand has not declined despite higher pump prices, and increased 0.1 percent in November compared with the same month a year earlier.

In China, a gasoline and diesel shortage suggests "that pent-up demand is significant," the IEA said, citing an "exponential increase" of energy use along with increased demand for cars, trucks, and planes, among other oil-consuming items in the booming Chinese economy.

Production from Iraq fell slightly to 2.3 million barrels per day in December, after hitting a 3 1/2-year high in the previous month, the IEA said. The agency said it was revising upward its estimate for Iraqi output in November to 2.4 million barrels per day, from 2.3 million.

The IEA said Iraq has signed an agreement with an affiliate of Russia's Gazprom to study the reactivation of 300,000 barrels per day of pipeline capacity from Kirkuk to Banias, Syria, that has been out of operation since before the U.S.-led war in Iraq began.

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Oil prices dip after flirting with 100 dollars

LONDON (AFP) — World oil prices eased on Thursday, one day after striking record peaks near to 100 dollars per barrel on concerns over weak crude supplies and the falling dollar.

Investors took a cautious stance to protect their positions since US floor trading was shut Thursday owing to the Thanksgiving holiday, analysts said.

New York's main contract, light sweet crude for January delivery, fell 39 cents to 96.90 dollars per barrel in electronic trade. The contract had hit an historic high of 99.29 dollars on Wednesday.

Elsewhere Thursday, London's Brent North Sea crude for January delivery slipped 21 cents to 94.63 dollars per barrel, after striking an all-time peak of 96.53 dollars on Wednesday.

"We have come up just short of 100 dollars twice now, so there is strong resistance (there)," Sucden analyst Michael Davies said in London.

Oil prices had failed to top 100 dollars per barrel on Wednesday, despite official data which showed that US energy stockpiles fell more heavily than expected last week.

David Moore, a commodity strategist with the Commonwealth Bank of Australia, said he had expected prices to rise after the disappointing US energy report.

"I thought the inventory data would be supportive of the market," Moore said. "It may have been investors were cautious ahead of the Thanksgiving holiday."

The US Department of Energy (DoE) announced Wednesday that reserves of US crude oil had sunk by 1.1 million barrels in the week ending November 16.

Analysts' consensus forecast had been for a gain of 750,000 barrels.

The DoE added that US reserves of distillates, including crucial heating fuel and diesel, dived by 2.4 million barrels last week. That was far heavier than market expectations for a drop of 450,000 barrels.

Heating fuel demand is expected to pick up as the Northern hemisphere winter kicks in next month. The US northeast region is the world's biggest user of heating oil.

Moore said the market can expect continued volatility in the weeks ahead as tight global supplies and geopolitical tensions in the Middle East continue to worry investors.

"The oil prices are certainly volatile and the outlook is obviously subjected to a lot of uncertainty. For that reason, we will see oil prices move higher in the near term ... it is still possible for oil prices to go above 100 dollars," he added.

Crude oil prices have surged by about 64 percent since the start of 2007, supported by supply disruptions in key producers such as Nigeria, geopolitical jitters over the Iranian nuclear crisis, and strong demand from China and India.

Oil prices were also winning support from a troubled dollar, which is striking a series of record low points against the surging euro.

A weak greenback encourages demand for dollar-priced commodities because they become more attractive to investors using stronger currencies.

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Oil prices hit record highs amid dollar weakness

NEW YORK (AFP) — World oil prices soared to new records Tuesday, breaching 98 dollars a barrel in New York, amid supply concerns and as the US dollar continued to weaken against other major currencies.

New York's main oil futures contract, light sweet crude for January delivery, soared 3.39 dollars to close at 98.03 dollars per barrel.

Prices in New York hit an all-time high of 98.62 dollars on November 7 during intraday trading, but Tuesday marked the first time prices had closed above 98 dollars.

In London, the price of Brent North Sea crude for January delivery surged 3.21 dollars to settle at 95.49 dollars per barrel, smashing a prior high of 95.19 dollars struck in November 7.

In after-hours trade, Brent crude was trading at even higher levels, at 96.24 dollars a barrel.

Some analysts believe oil prices could soon strike 100 dollars a barrel, especially as oil demand is being stoked by China and India's breakneck economic growth.

"Oil prices were higher today, with the dollar reaching fresh record lows against the euro and still coming off against other major currencies," Sucden analyst Michael Davies said.

The European single currency leapt to a historic peak above 1.48 dollars. The weakening dollar makes dollar-denominated commodities like oil cheaper for buyers armed with stronger currencies.

The market also continued to focus on the state of global energy supplies.

"Oil markets remain tight," analysts from the Commonwealth Bank of Australia said.

Despite supplies being strained ahead of the northern hemisphere winter, OPEC opted not to jack up its production quotas following a meeting in Saudi Arabia over the weekend.

The Organization of the Petroleum Exporting Countries (OPEC) has been under pressure, in particular from the United States, to boost supply to help cool prices.

However, OPEC's final declaration on Sunday after the meeting urged world peace to help stabilize prices and included a commitment to help fight global warming.

OPEC, which pumps 40 percent of global crude supplies, last decided to raise output in September when the oil producers' cartel agreed to provide an extra 500,000 barrels a day to the market, effective from November 1.

Some traders believe the ongoing weakness in the dollar will prompt OPEC to seek higher prices for oil, if not to move away from the currency all together.

"(OPEC) producers have seen their purchasing power decline with the dip in value of the greenback," said Bank of Ireland analyst Paul Harris.

OPEC has said it would hold off any discussion regarding production until its next meeting in December.

"The apparent removal of the possibility of increased supply will serve to at least underpin crude oil at these (price) levels," Harris said.

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