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UPDATE 3-Brent falls towards $98 on demand worries
June 5, 2012 / 10:51 AM / 6 years ago

UPDATE 3-Brent falls towards $98 on demand worries

* Treasury minister says markets closed to Spain

* All of the euro zone’s major economies in decline - PMI

* G7 to hold emergency talks on euro debt crisis

* Shell CEO says oil prices to ease further this year (Changes dateline, updates throughout)

By Jessica Donati

LONDON, June 5 (Reuters) - Oil prices slid towards $98 a barrel on Tuesday as demand expectations were hit by another round of poor data from the euro zone and comments by the International Energy Agency (IEA) that oil prices were still a threat to the global economy.

Despite oil prices having slid to a 16 month low on Monday, the IEA said global oil demand growth in 2012 may fall short of its forecast 800,000 barrels per day.

“Oil demand growth could be markedly weaker than our base case assumption,” said the IEA’s executive director Maria van der Hoeven told reporters at a news conference on Tuesday. [ID;nL3E8H53WD]

Van der Hoeven said oil still trading near $100 a barrel was contributing to the risk of a further economic slowdown.

Brent crude for July delivery was down 68 cents at $98.17 a barrel at 1012 GMT, after briefly slipping below $98 a barrel earlier in the session. On Monday, Brent touched a 16-month low of $95.63 before recovering and closing higher.

U.S. crude was down 20 cents at $83.78 a barrel.

Also striking a bearish note for investors, Royal Dutch Shell CEO Peter Voser said oil prices were likely to keep falling well into the second half of the year due to a slowing global economy and easing geopolitical uncertainty.

“Global demand is softening, we have got recessionary elements in Europe, a small slowdown in Asia Pacific,” Royal Dutch Shell CEO Peter Voser told Reuters on the sidelines of an industry conference on Tuesday.

“At the same time, some of the geopolitical elements of price volatility over the past few months have kind of receded, and therefore we see a softening of prices which I expect to go well into the second half of this year.”


Fanning concerns about global oil demand growth, euro zone retail sales fell more than expected in April, sliding by the biggest margin so far this year, the EU’s statistics office Eurostat said on Tuesday.

And in another indication the euro zone is stumbling, Tuesday’s purchasing managers indexes (PMIs) showed the bloc’s vast private economy shrank in May at the fastest pace in nearly three years, with company order books collapsing.

Oil prices erased early gains after Spain’s treasury minister said credit markets were shut to the euro zone’s fourth biggest economy in a dramatic radio interview on Tuesday. The risk premium investors demand to hold Spanish 10-year debt rather than German equivalents hit a euro-era high last week.

Finance chiefs were due to hold emergency talks on the blocs worsening debt crisis in a conference call on Tuesday.

Worries about a chaotic break up of the euro zone and shrinking economic activity has taken the spotlight off Iran. Iranian oil will be subject to a U.S. and EU embargo from July 1 over Iran’s disputed nuclear program, which just three months ago helped push Brent to above $128.

The United Nations nuclear watchdog and Iran will hold a new round of talks on Friday to try to reach an agreement to resume a long-stalled probe into Tehran’s atomic activities, the head of the IAEA said on Monday. (Additional reporting by Randy Fabi in Singapore, Florence Tan and Simon Webb in Kuala Lumpur; editing by Himani Sarkar and Keiron Henderson)

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