Oil Extends Slump as Equities Slide, IEA Cuts Demand Outlook
World oil prices slumped further on Thursday, in line with sliding global stock markets, and after the International Energy Agency lowered its outlook for global demand.
New York's main contract, light sweet crude for June, known as West Texas Intermediate (WTI), dived as low as $96.51 per barrel -- reaching a level last seen on March 16. It later stood at $96.70, down $1.51 from Wednesday's close.
Brent North Sea crude for delivery in June fell $1.01 to $111.56 a barrel in late morning London deals.
Asian and European equities tumbled on Thursday, after a sharp overnight sell-off on Wall Street caused by heavy falls in commodities as lingering concerns over European debt boosted the dollar.
"We are still tracking the broader market this morning with oil featuring on the downside," VTB Capital commodities analyst Andrey Kryuchenkov told Agence France Presse.
"The IEA's monthly report added some pressure, especially to WTI prices, after the OECD energy advisor lowered its 2011 demand forecast for the first time this year, citing emerging evidence of slowing demand due to elevated prices in North America."
In earlier Asian deals, crude futures had rebounded, after plunging on Wednesday on signs of faltering demand in the United States and China, which are the world's top oil-consuming nations.
However on Thursday, the Paris-based IEA cut its outlook for global oil demand by 190,000 barrels per day because of high prices and unexpectedly weak growth in rich countries.
"Forecast global oil product demand growth for 2011 is trimmed on persistent high prices and weaker IMF GDP projections for advanced economies," the IEA said, putting total demand in 2011 at 89.2 million barrels per day.
Commenting on sharp falls in the price of oil at the beginning of May, the IEA said: "A faltering economic recovery, stronger dollar and speculative commodity sell-off were variously cited as underpinning the correction.
"True, renewed concerns about the economic impact of high prices and shaky economic statistics from the U.S., China and Germany may have contributed to a degree of profit taking.
"But as the dust settles, prices have again begun to creep higher."
The IEA added: "The market bull run may have legs for a while longer."
Oil prices also came under pressure this week after the U.S. Department of Energy's latest weekly report on energy reserves, which another increase in crude stockpiles and an unexpected rise in gasoline reserves.
The increase in reserves is a sign of softer demand in the world's largest oil-consuming nation.
Data showing China's inflation rate still well above the government's target also sparked fresh concerns that Beijing will invoke further cooling measures.
This could slow down growth in the world's second-largest economy and affect demand for oil, analysts said.