Oil prices fell to near $86 a barrel today after a report showed OPEC boosted crude output last month to a two-year high amid signs of growing global demand.
By early afternoon in Europe, benchmark crude for March delivery was down 35 cents at $86.36 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 23 cents to settle at $86.71 on Wednesday.
In London, Brent crude was down six cents to $101.76 a barrel at ICE Futures exchange.
The spread between the Nymex and Brent contracts has continued to expand, aided by another rise of U.S. crude stockpiles and labor strikes connected to the revolt in Egypt which could have an impact on European supplies.
"Traffic at the Suez Canal was not affected, but clearly, the energy markets are worried that some of these work stoppages may eventually engulf the Canal zone, potentially trapping or rerouting oil tankers," said Edward Meir, senior commodity analyst at MF Global in New York.
ADVERTISEMENT
According to a report Wednesday from Platts, the energy information arm of McGraw-Hill Co., crude oil production by the 12-member Organization of Petroleum Exporting Countries rose one percent last month to average 29.57 million barrels per day, a two-year high.
OPEC has kept its official crude production quotas unchanged as oil has risen from the $70s most of last year to a two-year high above $92 last week. Higher oil prices have helped fuel inflation and threaten to undermine the global economic recovery.
Earlier this week the U.S. Energy Information Administration boosted its estimate for 2010 oil demand growth to 2.39 million barrels a day, which would be the second biggest annual increase in consumption in the past 30 years.
"The message remains one of significantly tightening oil market balances over the next few years," Barclays Capital said in a report.
Today the Paris-based International Energy Agency also raised its demand estimates, expecting global consumption to exceed 90 million barrels a day for the first time by the last quarter of 2011.
The IEA said higher demand in Asia and North America prompted its revision, but warned about threats which could dampen the world's appetite for crude.
"Persistent frailties in advanced economies and inflationary pressures in emerging markets pose downside risks to the outlook," the IEA said in the monthly oil market report.
In other Nymex trading in March contracts, heating oil fell 1.5 cents to $2.7539 a gallon and gasoline slid 0.14 cent to $2.5246 a gallon. Natural gas futures lost 1.2 cents at $4.032 per 1,000 cubic feet.
