Oil Falls on Signs of Slowing Demand
Source: MSN (4/12/11)
"Slower demand had led top exporter Saudi Arabia to cut back production and the IEA warned that strong prices could be eroding demand further."
The price of U.S. crude for May delivery was lately down $3.60 to $106.32 a barrel.
Sources told Reuters that Saudi Arabia, which has the largest spare capacity production cushion in the Organization of Petroleum Exporting Countries (OPEC), had trimmed production by around 500,000 barrels per day to around 8.5 million bpd on the back of slow demand.
Investors that bought into the oil market in the past few months could now be taking a chance to exit, according to Brendan Brown, head of economic research at Mitsubishi UFG Securities.
"I think we are going to see some sort of a rotation, with some investors deciding to get out and take some profit," Brown told Reuters.
Another concern was a report from Goldman Sachs. It warns investors that crude is due for a "substantial pullback."
Goldman analyst David Greely noted that global supplies remain "adequate" even though the rebellion in Libya shut down production there. Before fighting broke out in February, Libya exported about 1.5 million barrels per day—2% of global demand—mostly to Europe.
Saudi Arabia's production cut comes amid growing fears that strong crude oil prices are denting demand growth. The IEA, the West's energy policy adviser, earlier warned prices could ultimately self-regulate through a global economic slowdown.