Oil prices fall on weak demand forecast

OPEC countries are complying with a landmark deal to reduce a worldwide glut in oil (AFP Photo/Prakash Singh) (AFP/File)

New York (AFP) - Oil prices dropped Tuesday with the main European benchmark contract sinking to a 13-month low after the International Energy Agency slashed its demand outlook for 2014 and 2015.

US benchmark West Texas Intermediate (WTI) for September delivery fell 71 cents to $97.37 a barrel on the New York Mercantile Exchange.

European benchmark Brent oil for delivery in September tumbled $1.66 to $103.02 a barrel, its lowest closing price since July 1, 2013.

Pointing to slower global economic growth, the IEA projected 2014 oil demand would rise by 1.0 million barrels a day to 92.7 mbd, compared to its July forecast for growth of 1.2 mbd.

The IEA, the oil policy arm of the Organisation for Economic Cooperation and Development, also cut its 2015 demand forecast to 94 million barrels a day, 300,000 barrels less than the previous prediction.

The IEA cited a "surprisingly steep" decline in oil demand in developed economies and described the market as generally flush with supply.

"Despite armed conflict in Libya, Iraq and Ukraine, the oil market today looks better supplied than expected, with an oil glut even reported in the Atlantic basin," the IEA said.

"Weak underlying fundamentals in the market continue to drive the prices lower," said Gene McGillian broker and analyst at Tradition Energy.

"We have ample supply of oil," he added.

Traders will have an opportunity to assess the latest in the US supply picture Wednesday when the US Energy Information Administration releases its weekly oil-inventory report.