Oil Falls After IEA Says It May Reduce Energy Demand Forecast

April 3 (Bloomberg) -- Crude oil fell, paring yesterday’s 8.8 percent rally, after the head of the International Energy Agency said the group is likely to cut its energy demand forecast on declining economic growth projections.

There is a “high probability” of a downward revision in the IEA’s next monthly report, due on April 10, Executive Director Nobuo Tanaka said yesterday in an interview with Bloomberg Television.

Crude oil for May delivery fell as much as 58 cents, or 1.1 percent, to $52.06 a barrel on the New York Mercantile Exchange and traded at $52.12 at 11:18 a.m. Sydney time. Oil rose $4.25 to settle at $52.64 a barrel yesterday, the biggest increase since March 12, as leaders of the Group of 20 nations met and announced plans to combat the global recession. Tanaka spoke before the talks ended.

“There’s nothing bullish in the fundamentals in the near future,” said Raymond Carbone, president of Paramount Options Inc. and a Nymex trader. He said oil gained “on hope” yesterday as the G-20 met.

Reports showing rising oil inventories and falling demand signal that the worst of the recession may not be over. U.S. crude supplies climbed 2.84 million barrels in the week ended March 27 to the highest since July 1993, the Energy Department reported April 1. Gasoline stockpiles rose by 2.23 million barrels to 216.8 million.

World oil demand this year will average 84.4 million barrels a day, the IEA said last month.

G-20 Rally

Oil surged yesterday after the G-20 agreed on measures to fight the global recession at a meeting in London. The G-20 said it will implement new rules on compensation and bonuses, expand controls on hedge funds and pledge more than $1 trillion in emergency aid to cushion the economic fallout.

There was “a renewed sense that the worst may be behind us,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “As the economy recovers there will be increased demand for commodities.”

The G-20 nations will channel $850 billion to the International Monetary Fund and World Bank. They also offered cash to revive trade to help governments weather the economic and social turmoil. They sidestepped the question of whether to deliver more stimulus in their own economies.

“The markets like the fact that a lot more money is going to the IMF,” said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago, said yesterday. “The additional funds should be stimulative.”

Equities Rally

Stocks rallied around the world yesterday, driving the MSCI World Index higher for a third day, as some reports suggest the pace of economic decline may be easing.

The Standard & Poor’s 500 Index increased 3.7 percent to 840.95. The Dow Jones Industrial Average rose 3.6 percent to 8,037.98.

“Oil demand will start going up, perhaps later this year,” Ibrahim al-Muhanna, an adviser to Saudi Arabian Oil Minister Ali al-Naimi, said yesterday at an oil conference in Paris. “There is no doubt the economic crisis will be resolved and the economy will rebound.”

Prices have rebounded this year as the Organization of Petroleum Exporting Countries cut production. The group reduced daily output targets by 4.2 million barrels since September to prevent a glut and bolster prices.

OPEC cut oil output by 1.2 percent to an average 27.395 million barrels a day last month, according to a Bloomberg News survey. The 11 OPEC members with quotas, all except Iraq, pumped 25.06 million barrels a day, 215,000 more than their target of 24.845 million.

Bottomed Out

Oil prices “have bottomed out now and we hope they will improve, even though fundamentals are really the same,” OPEC Secretary-General Abdalla El-Badri said yesterday before the Paris oil conference.

Goldman Sachs Group Inc. said Brent crude oil prices may reach $50 a barrel this year, up from an earlier estimate of $45, because of OPEC production cuts.

Brent crude oil for May settlement rose $4.31, or 8.9 percent, to end the session at $52.75 a barrel on London’s ICE Futures Europe exchange.