Oil futures dipped yesterday as tea-leaf readers struggled to make sense of conflicting signals.
Tightening supplies, including in the United States, have helped propel a run-up in crude prices in recent days. But a worse than expected trade deficit reported by Japan yesterday has revived fears that the economic crisis may eat into global energy demand.
Meanwhile, geopolitical concerns were calmed after Iran agreed to meet again with UN nuclear inspectors.
North Sea Brent crude slipped 70 cents to US$113.94 a barrel and West Texas Intermediate fell 17 cents to $96.67 yesterday as Japan said its trade deficit ballooned to ¥517.4 billion. DNB, an Oslo bank, lowered its forecast for crude prices this year by $4 to $111 a barrel and reduced its outlook for next year's prices from $120 to $107 a barrel.
"Geopolitics and increased liquidity poured into the system from central banks should pose positive elements for oil prices but fundamentally the market will not look strong," said Torbjørn Kjus, an analyst at DNB Markets.
"Global oil demand growth will be weak also in 2013."
International Atomic Energy Agency inspectors will meet with Iranian officials at the nation's embassy in Vienna tomorrow, the first scheduled talks since negotiations over increasing UN access to Iran's disputed nuclear programme broke down in June.
Separately, Iran's oil ministry said on its website it planned to consult other Opec producers should the US release stockpiles.
"It's quite hard to read ... the market seems to be moving in a sort of sideways range," said Christopher Bellew, a senior broker at Jefferies Bache in London.
"America is making an economic recovery, China is seeing economic growth of around 7 per cent and there's going to be tightness rather than economic collapse," he said.
"If you told me that the market was going to jump in any direction, I would imagine it would be upwards rather than downwards."
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