Oil prices tumbled under $60 today on renewed demand concerns, as the IEA said signs of a strong rally in global economic growth and oil demand were fading.
The International Energy Agency however added in its latest monthly report that there could be a dramatic turnaround for demand next year.
US crude fell 98 cents to $59.43 a barrel by 5.39pm, while London Brent crude traded down $1.05 to $60.05 a barrel.
Despite the week's fall, crude prices are up more than 60% since the start of the year, fuelled partly by a weak dollar and overly upbeat hopes of a recovery in the global economy.
In the last two months many economists had announced that the global recession was bottoming out and were forecasting a strong recovery in the second half of this year, the International Energy Agency commented today.
But 'over the past two weeks the mood has suddenly changed, as many leading economic and energy indicators continue to show very weak readings, suggesting that the 'green shoots' have been largely driven by a rebuild of inventories rather than by strong end-user demand,' the IEA said.
Oil prices had eked out small gains yesterday after falling below $60 for the first time since late May as the market pondered sluggish energy demand in major economies.
In its weekly oil inventories report Wednesday, the US Department of Energy reported a sharp spike in gasoline and other oil product inventories in the week ending July 3.
Although crude oil inventories plunged a sharper-than-expected 2.9 million barrels, the decline was driven by a surge in refinery use. By contrast, US oil product stockpiles have ballooned in recent weeks because of weak demand amid a severe recession that began in December 2007.
