By Christian Schmollinger
April 13 (Bloomberg) -- Crude oil fell in New York after the International Energy Agency said demand in 2009 may slump to the lowest in five years as the global recession deepens.
Oil consumption will fall by 2.4 million barrels a day this year, about the same amount that Iraq produces, to 83.4 million barrels a day, the IEA said on April 10 as trading in New York and London was closed for the Good Friday holiday. U.S. crude supplies are at their highest since July 1993, the Energy Department said on April 8.
“Although a lot of people already understood that demand is not good, the IEA report is making speculators bearish,” said Ken Hasegawa, a commodity derivative sales manager at brokerage Newedge in Tokyo. “There is still no confidence to buy the market and take long positions.”
Crude oil fell as much as 77 cents, or 1.5 percent, to $51.47 a barrel in electronic trading on the New York Mercantile Exchange. It was at $51.56 a barrel at 8:26 a.m. Singapore time.
The contract closed 5.8 percent higher at $52.24 on April 9 as equities gained, signaling that some investors expect economies to stabilize, bolstering energy demand.
“Signs that the economic situation is getting better will be supportive for the market, so the downside is limited, but the market can’t go higher,” Newedge’s Hasegawa said. “We’ll be in a narrow range of $47 to $53 a barrel.”
IEA Report
Oil demand will shrink by 2.8 percent this year as worldwide gross domestic product declines by 1.4 percent, according to the IEA, the adviser to 28 consuming countries. The organization had until now assumed the global economy would expand in 2009. The decline outpaces supply from OPEC’s third- largest producer, Iraq, which last month pumped 2.27 million barrels a day.
“The pace of contraction is close to early 1980s levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010,” the Paris-based adviser said in its monthly report.
The outlook “implicitly discards” the agency’s earlier view that industrial activity, and demand for fuels, would recover in the second half of the year. Consumption during the first three months of the year was revised lower by 700,000 barrels a day.
“The IEA has a history of being too optimistic towards world oil demand,” said Deutsche Bank analysts led by Joel Crane in a report on April 9, before the IEA release. “On our estimates, global oil demand growth is equivalent to world GDP growth less 2 percent, which given our assumption that world growth will slump by 1.9 percent implies a potential contraction of global oil demand of over 3 million barrels a day.”
Net Longs Rise
Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended April 7, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 12,493 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 5,947 contracts, or 91 percent, from a week earlier.
Brent crude oil for May settlement fell as much as 25 cents, or 0.5 percent, to $53.81 a barrel on London’s ICE Futures Europe exchange. It was at $53.87 a barrel at 7:49 a.m. Singapore time. The contract rose $2.47, or 4.8 percent, to end the session at $54.06 a barrel on April 9.
Brent is trading at a premium of more than $2 a barrel to the West Texas Intermediate contract in New York, swinging from a discount of 43 cents on March 31.
“As long as the inventories in the U.S. remain very high then this premium will keep as it is,” said Newedge’s Hasegawa. “I think May WTI will be weak until expiry.”
The May contract will close on April 21.
U.S. crude-oil supplies increased 1.65 million barrels to 361.1 million last week, the highest since July 1993, the report from the U.S. Energy Department showed.
Global oil demand falls to an annual low during the second quarter as refineries close to perform maintenance after winter in the Northern Hemisphere.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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