Oil prices dipped today in light trade, reversing earlier gains as traders digested news that the International Energy Agency had cut its estimate for demand growth in 2012.
New York's main contract, West Texas Intermediate crude for delivery in February, decreased 43 cents to $100.28 a barrel. Brent North Sea crude for March shed 91 cents to $110.62 a barrel.
The Paris-based International Energy Agency today cut its 2012 global oil demand growth forecast, with the market dragged down by a weakening world economy and stubbornly high prices, while the nuclear crisis with Iran deepens.
The IEA cut its outlook for 2012 demand growth to 1.1 million barrels a day from 1.3 million, citing the impact of a fall in demand in the fourth quarter of 2011 of 300,000 barrels.
According to the IEA, demand will be divided between declining appetite for oil in richer OECD countries, particularly in Europe, and continued growing demand in developing countries, especially Asia.
The current standoff with Iran, faced with the prospect of an European Union oil embargo on fears Tehran is aiming to acquire nuclear weapons, has also "further dampened prospects" for demand, along with a mild winter in the northern hemisphere, the IEA said.
The IEA added that oil prices, however, remained stable as "a rising likelihood of sharp economic slowdown" was offset by supply concerns linked at least in part to the Iranian crisis. The IEA warned that in 2012 that geopolitical risks have shifted to Nigeria, Iraq and "most pressingly, Iran."
Oil prices had risen in earlier trade today as the market took its cue from the weaker dollar. The dollar lost ground against the euro today as speculation that China could ease monetary policy improved market sentiment and encouraged investors to buy the risk-sensitive single currency.
A weaker US unit makes dollar-priced crude cheaper for buyers using stronger currencies, like the euro, and this tends to boost oil demand and push up prices.
Crude futures also increased yesterday on positive US and Chinese economic data and after Saudi Arabia said it would like to keep prices high at around $100 a barrel, analysts said.
Official data yesterday showed that China's economy grew by 8.9% in the last quarter of 2011, higher than analyst expectations of 8.6% although it was lower than in the previous three months.
In the US, sentiment was also boosted by the Federal Reserve's Empire State index of manufacturing activity in New York, which showed a pick-up in January that exceeded expectations. The US is the world's largest oil consumer, while China is the global leader in energy consumption.
