Oil hovers above $85 amid demand forecast cuts

Friday, October 7, 2011, Vol. 35, No. 40
ALEX KENNEDY, Associated Press

SINGAPORE (AP) — Oil prices hovered above $85 a barrel Thursday in Asia after the International Energy Agency joined OPEC in cutting its forecasts for crude oil demand amid a slowing global economy.

Benchmark crude for November delivery was down 20 cents at $85.37 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 24 cents to settle at $85.57 in New York on Wednesday.

Brent crude was down 15 cents at $111.21 a barrel on the ICE Futures Exchange in London.

The IEA on Wednesday followed OPEC in trimming its forecasts for crude oil demand this year and 2012. The Paris-based IEA still expects world demand to hit a record this year, but more slowly than previously expected. The IEA's outlook followed a similar one from the Organization of Petroleum Exporting Countries on Tuesday.

In the U.S., MasterCard SpendingPulse reported Wednesday that drivers bought less gas for the 29th week in a row. Gas consumption last week was down about 2 percent from the same period last year, according to SpendingPulse.

The fall in the oil price was limited by a report that showed U.S. crude supplies dropped more than expected last week, suggesting demand may be improving.

The American Petroleum Institute said late Wednesday that crude inventories fell 3.8 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 300,000 barrels.

Inventories of gasoline dropped 1.2 million barrels last week while distillates slid 3.1 million barrels, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data later Thursday.

"The API came out with a fairly bullish report," energy trader and consultant The Schork Group said in a report. "Crude between $85 and $95 is reasonable in the coming months."

In other Nymex trading, heating oil rose 0.2 cents to $2.936 per gallon and gasoline futures fell 0.8 cent to $2.74 per gallon. Natural gas was unchanged at $3.489 per 1,000 cubic feet.