Oil Prices Slip As Demand Drops

NYMEX crude oil futures slipped early Friday (May 11) as a report by the West's energy watchdog that world crude demand had been slower than expected so far this year fueled fears of lower consumption ahead. In choppy trade, June crude fell 22 cents to $28.30 a barrel, eating into Thursday's 29-cent advance. It subsequently recouped most of the early losses, showing a two-cent loss at $28.50 by 10:24 a.m. (1424 GMT). June Brent crude in London extended losses after the NYMEX opening, then trimmed the loss to 11 cents at $28.37 a barrel. In its monthly oil market report, the Paris-based International Energy Agency (IEA) said it had lowered its forecast for world oil demand growth by a further 300,000 bpd to just 1.02 million bpd. The report sliced 160,000 bpd from the IEA's forecast for world oil demand in 2001 to 76.54 million. In revising its forecast, IEA cited "lower-than-expected first-quarter deliveries and the effect of persistently high prices in a context of slowing economic growth." Gasoline futures, the market's main bullish engine of late, retreated on early selling, with no news from refineries to stoke buying. June gasoline slid 1.26 cents to $1.0615 a gallon, extending overnight losses of 0.56 cent, later edging back to $1.0650, down 0.91 cent. Traders said the market was looking to take a pause from recent rallies spurred by concerns over gasoline supply ahead of the summer driving season and signals that OPEC will not relax supply curbs when its ministers meet in June. Oil traders are closely watching OPEC's compliance with production cuts to see if the cartel can keep production discipline in its bid to stabilize oil prices. OPEC ministers have said there is no need to raise production in June but that they might open up the taps later if market demand warrants such a move. But the cartel could come under pressure to lift supplies from the United States, the world's biggest oil consumer. The Bush administration appeared to reverse course on Thursday, blaming OPEC for the suffering of U.S. consumers who are paying record high gasoline prices at the pump. Energy Secretary Spencer Abraham said OPEC was at fault for high fuel prices, contradicting comments made earlier in the week by Vice President Dick Cheney that a shortage of U.S. refining capacity, not OPEC, had caused gasoline prices to soar. - (Reuters)