Oil rises in spite of IEA cut in its demand forecasts

Oil prices rose on Monday as the market shrugged off a bearish report from the International Energy Agency, opting instead to focus on news of further attacks on Nigeria’s energy infrastructure by militants.

The IEA, the oil consuming countries’ watchdog, sharply lowered its medium-term forecast for global oil demand, suggesting that economic fundamentals will prevent a repeat of crude’s surge towards $150 last year.

The IEA lowered its 2008-2013 demand forecast by 3.7 per cent compared with its previous estimate in December, but stressed that the chances of an oil shock had only lessened rather than disappeared altogether.

Nobuo Tanaka, executive director of the IEA said that if oil prices were to rise too quickly and too much it could damage an economic recovery. Crude prices have rallied since the start of the year, doubling since February having tumbled from an all-time high of $147 reached in July 2008.

Traders however pointed towards news of further rebel attacks on the Nigerian petroleum industry as having greater short-term impact than the IEA report.

The Movement for the emancipation of the Niger Delta, the most active of Nigeria’s militant groups, said it had attacked a Royal Dutch Shell oil platform – prompting concern that oil supplies from Africa’s largest exporter could be disrupted.

The MEND action marked the latest in a string of recent attacks in the Niger Delta region in the past fortnight.

Nymex West Texas Intermediate futures for August delivery rose 0.49 cents to $69.65, while ICE August Brent gained 40 cents to $69.32.

Gold dipped as investors opted to take profits from the two week high hit in the previous session. Spot gold was quoted at $942.05 a troy ounce, 0.6 per cent lower than yesterday’s high of $948.20.

Base metals were mixed, with copper rising 0.6 per cent to $5085 a tonne, while aluminium was flat at $1650 per tonne.