Oil Falls on Concern Demand to Drop More Rapidly Than Supply

Jan. 12 (Bloomberg) -- Crude oil fell for a fifth day in New York, extending last week’s 12 percent drop, on concern demand will decline more rapidly than the Organization of Petroleum Exporting Countries cuts output.

Deutsche Bank AG on Jan. 10 lowered its forecast for the average price of crude oil this quarter by $10 to $45 a barrel, citing expectations consumption will fall by 1 million barrels a day this year. U.S. supplies have climbed in 13 of the past 15 weeks as the economy slows, according to the Energy Department.

“What OPEC has done is probably going to be enough to tighten up the market and support the oil price, but it will take a while for those production cuts to eat away at inventories,” said David Moore, a commodity strategist at Commonwealth Bank of Australia. “The near-term contracts are still very low and that reflects the fact we still have ample supplies at the moment.”

Crude oil for February delivery fell as much as 68 cents, or 1.7 percent, to $40.15 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $40.23 at 7:14 a.m. in Singapore.

OPEC, supplier of more than 40 percent of the world’s oil, agreed last month to cut production quotas by 9 percent to revive prices as the global recession erodes demand. Oil has plunged more than $100 in the last six months.

The group may cut its production further should crude prices continue to decline, Iran’s OPEC Governor Mohammad Ali Khatabi was cited as saying Jan. 11 by the Oil Ministry. OPEC is scheduled to meet next in Vienna on March 15.

‘Steep Curve’

On Jan. 9, prices in New York dropped 2.1 percent to $40.83 a barrel after the U.S. said it lost 2.589 million jobs last year, the most since 1945. Oil for March delivery is more than $5 more expensive than the front-month contract, while the April contract is a further $3 more expensive.

“The curve is very steep, which is consistent with the view that the market tightens up in time and we get higher prices down the track,” Commonwealth’s Moore said.

Last week’s decline followed a 23 percent jump the week before, the most since August 1986. Brent crude prices on Jan. 9 fell 0.6 percent to $44.42 a barrel on London’s ICE Futures Europe exchange.