Crude Oil Plummets To End Below $82 As IEA Cuts Demand Forecast

(RTTNews) - U.S. crude oil plunged to end sharply lower on Tuesday, after the International Energy Agency predicted a modest rise in global demand in 2015 and on some soft data from the eurozone.

Oil prices also remained under pressure, weighed by a strong dollar and concerns over a glut of supplies.

The IEA revised its 2014 global oil demand growth forecast to 92.4 million barrels a day, down 200,000 b/d from its September report, citing "reduced expectations of economic growth and the weak recent trend." This has been the weakest projection in five years.

Meanwhile, oil production increased almost 910,000 barrels a day last month, helped by higher production from the Organization of the Petroleum Exporting Countries and non-OPEC producers.

"Projections of oil demand growth for 2014-15 have been reduced, but growth is still expected to gain momentum. Recent data suggest that may already have started to happen," the IEA said in its monthly report this morning.

In some soft economic news from the eurozone, German investor sentiment dropped for a tenth successive month in October to enter the negative territory for the first time in nearly two years.

Light Sweet Crude Oil futures for November delivery, the most actively traded contract, plummeted $3.90 or 4.5 percent to close at $81.84 a barrel on the New York Mercantile Exchange Tuesday.

Crude prices for November delivery scaled a high of $85.60 a barrel intraday and a low of $81.67.

On Monday, crude oil futures ended slightly lower amid signs of a significant increase in supplies even as demand continued to wane.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 85.77 on Tuesday, up from its previous close of 85.22 late Monday in North American trade. The dollar scaled a high of 85.82 intraday and a low of 85.28.

The euro trended lower against the dollar at $1.2653 on Tuesday, as compared to its previous close of $1.2752 late Monday in North American trade. The euro scaled a high of $1.2767 intraday and a low of $1.2640.

In economic news from the eurozone, German investor sentiment declined for a tenth successive month in October to enter the negative territory for the first time in nearly two years. The ZEW Indicator of Economic Sentiment dropped to -3.6 from 6.9 in September, far worse than the zero reading forecast by economists.

Data from Eurostat showed that the decline in eurozone industrial production for August was worse-than-expected. Eurozone industrial production declined 1.8 percent month-on-month, a more severe decline than the 1.6 percent fall predicted by economists.

Meanwhile, Germany's economy ministry today cut its growth forecasts for this year and next, citing weaker demand in export markets due to rising geopolitical tensions and sluggish global growth. The growth forecast for this year was slashed to 1.2 percent from 1.8 percent predicted in April. The outlook for 2014 was reduced to 1.3 percent from a projection of 2 percent earlier.

U.K. inflation slowed to a five-year low in September, giving more space for the Bank of England to delay its first rate hike. Consumer price inflation eased more-than-expected to 1.2 percent in September from 1.5 percent in August, data from the Office for National Statistics showed Tuesday. This was the lowest rate since October 2009. Economists had forecast the rate to slow marginally to 1.4 percent.

Fed Reserve Vice Chairman Stanley Fischer says the weaker-than-expected global growth may delay the pace of eventual interest-rate increases.

"If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise," Fischer said yesterday to the IMF and World Bank in Washington.