Oil prices fall on demand worries

March 14, 2013 | 14:36

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Oil prices fell Wednesday after another build in US crude inventories and a lowered key oil demand forecast took the shine off better-than-expected US retail sales.

New York's main contract, West Texas Intermediate (WTI) for April delivery, closed essentially flat at US$92.52 a barrel, down two cents from Tuesday's closing level.

Brent North Sea crude for April dropped US$1.13 to settle at US$108.52 a barrel in London trade.

The New York session began sharply higher after official data showed US retail sales picked up 1.1 per cent in February, the biggest gain in five months and more than double expectations, though higher gasoline prices accounted for an important part of the surge.

Even so, it sparked hopes of continuing strong consumer spending in the US economy.

"That helped a lot with the market," said Bill Baruch of iiTrader.com.

But the benchmark New York contract began to fall after the US Department of Energy's weekly report showed another increase in crude inventories, by 2.6 million barrels, in the week ended March 8.

A downbeat demand forecast also weighed on market sentiment.

The International Energy Agency (IEA) lowered its global forecast for growth in world oil demand for the second straight month, citing the effects of uncertainty from the US budget talks, sluggish Chinese business activity and unemployment in Europe.

The IEA estimated that demand for oil would total 90.6 million barrels per day this year, a cut of 60,000 barrels from its forecast in February.

"The macroeconomic environment underpinning oil demand, as of yet, shows little sign of short-term improvement," it said in a report.