Oil slips on gloomy economy, stronger supply

Oil slips on gloomy economy, stronger supply

London: Brent crude fell slightly on Wednesday pressured by a gloomy demand outlook and expectations of increased supply from the North Sea and Libya.

Oil underperformed risk-sensitive equities, which got a boost after the head of the European Commission said it would soon present options for the introduction of euro area bonds, which investors hope will help ease the sovereign debt crisis.

Brent crude fell 15 cents to $111.74 by 2:27pm, while US light crude lost $1.00 to $89.21 per barrel.

“People are pessimistic on the economy, and the IEA demand forecast shows demand slowing," said Christophe Barret, analyst at Credit Agricole Corporate and Investment Bank.

The International Energy Agency said on Tuesday that world oil consumption will increase more slowly than expected this year and next as the pace of global economic growth eases.

Also contributing to the gloom, Moody’s Investors Service cut its ratings for French banks Credit Agricole and Societe Generale on Wednesday, citing their exposure to Greece.

And highlighting the weakness in the global economy, the number of Britons out of work showed its biggest rise in two years official data showed on Wednesday.

High pump prices slashed US gasoline consumption and forced cost-conscious motorists off the road this summer, making this driving season the worst for gasoline demand since 2009, MasterCard said on Tuesday.


Barret added that outages in the North Sea this month, which had pushed up the price of Brent Crude, combined with supply from Libya returning sooner than expected after the Gaddafi was ousted, was also pressuring prices.

US crude stockpiles fell a larger-than-expected 5.1 million barrels last week as Tropical Storm Lee disrupted output in the Gulf of Mexico, trade group the American Petroleum Institute reported on Tuesday.

Analysts polled by Reuters had projected a 3.1-million-barrel drop.

Government statistics on U.S. oil stockpiles and demand from the Energy Information Administration will follow on Wednesday at 1430 GMT.

US crude stockpiles likely fell for the second consecutive time last week as preparations for Tropical Storm Lee disrupted production in the oil-rich Gulf of Mexico, an extended Reuters poll showed on Tuesday.