Oil price struggles after controversial forecasts

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On Tuesday Brent crude dipped below $100 per barrel for the first time in nine months. This caused worries among investors supported by weaker than expected Chinese data and weakened US oil demand outlook.

During Asian trading hours the crude-oil futures for May delivery inched lower by 0.1% losing 10 cents to trade at $88.62 per barrel. This move came after the contract just finished partially higher in the regular New York Mercantile Exchange session.

Meantime the rival London-traded benchmark Brent North Sea crude rose recorded some gains. The future contract for June delivery went up 0.2% adding 23 cents to $100.14 per barrel. With this advancement Brent managed to reach the triple-digit price number. Yesterday the contract closed below $100 for the first time since July 2012.

At the beginning of the week Brent crude lost nearly 3% after Chinese economic reports. The data pointed the second-largest global oil consumer had unexpectedly slowed in the first quarter of the year.

On Tuesday The International Monetary Fund released its latest World Economic Outlook. The organization has updated its 2013 oil price forecast upward by $2.89 to $102.60 per barrel and 2014 expectations project an average price of $97.58 per barrel.

According to IMF in terms of growing geopolitical tensions oil prices are still a significant source of downside risk. Crude prices are forecasted to drop by nearly 3%. These expectations are based on recovering oil supply from the 2013 outages and robust growth in non-OPEC supply. That is mostly in North America which is projected to continue the US crude oil imports reduction. However IMF still believes that oil supply shock related risks haven’t changed marginally. Especially the ones linked to geopolitical factors, which are expected to evolve further. Therefore the agency expects world output to grow by 3.25% in 2013 and by 4% the next year.

Last Friday Citigroup also raised its 2013 forecasts for Brent and US WTI crude oil prices. The company cited that crude prices passed their expectations during the first three months. The bank added $5 to its oil forecast expecting Brent price of $104 and US oil price of $90 per barrel.

On the contrary, last week the International Energy Agency trimmed its estimate for global growth in oil demand in 2013. IEA is the third of the worldwide top oil forecasters. The agency predicts weaker consumption and its calculation should be carefully considered. IEA highlights the weak economic growth in the US and several emerging economies as well as deep recession in parts of Europe. These all together have damaged the demand figures. And this decline came at a time when oil output has been growing rapidly, especially in the US.

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