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Crude tumbles to nine-month lows on economic weakness

Lower oil demand and seasonal maintenance at refineries has put pressure on the oil price

Crude futures fell in April as increased pessimism over the global economic outlook, lower oil demand and seasonal maintenance at refineries put pressure on prices. Brent and WTI were trading at around $100/b and $89/b respectively on 22 April.

On 13 April Brent prices fell below $100/b for the first time since July 2012 on signs of slowing economic growth and sluggish crude demand. WTI slipped to $86/b, a four-month low, on expectations that the US would stockpile crude.

The Organization of Petroleum Exporting Countries (Opec) basket of 12 crude grades, which is used as a reference by the organisation, also fell below $100/b for the first time since July. The grade, which comprises crude from countries including Algeria, Angola and Iraq, was priced at $98.60/b on 15 April.

The International Energy Agency (IEA) cut its forecast for global oil demand growth in 2013 by 795,000 b/d, to 90.6m b/d.

The new forecast is driven by slower-than-expected demand from Russia, Japan, Spain and India. Relatively reliable electricity supplies and higher prices dampened gasoil demand in India, the IEA said. This will however be partially offset by growth of 1.28m b/d in other regions, the IEA said.

There has been exceptionally weak crude demand in the OECD, especially in Europe. The IEA said Europe’s oil consumption in 2013 is expected to be the lowest since the 1980s. The agency said it expects OECD oil demand to fall by 480,000 b/d, driven by a 340,000 b/d decline in Europe.

The International Monetary Fund cut its global economic growth forecast for this year to 3.3% on fiscal weakness in Europe and slower growth in China. This is down from a previous forecast of 3.5%.

China’s GDP growth in the first quarter of 2013 was 7.7% year-on-year, the country’s National Bureau of Statistics said on 12 April, down from around 8% in the previous quarter.

The IEA said “exceptionally deep seasonal maintenance” at refineries also contributed to weaker consumption. Nearly 7m b/d of refining capacity was offline in April because of maintenance, but much of this will come back into production before summer. US refiners are already getting back online, and global crude runs will likely increase steeply from May, the agency said.  

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