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Oil falls towards $35, OPEC cuts demand forecast

The uncertain global economic outlook prompted OPEC to forecast a fall of 180,000 barrels per day in world oil demand this year, 30,000 bpd more than its previous forecast.

U.S. crude was down $2.02 at $35.26 a barrel by 1520 GMT, after falling to a new contract low of $35.05 earlier.

Record stocks at Cushing, Oklahoma, the delivery point for U.S. crude futures, have helped drive U.S. crude prices down relative to North Sea Brent crude.

U.S. crude for February reached a record discount to Brent of more than $10 a barrel at one point on Thursday.

London Brent crude for February was down 13 cents at $44.95, ahead of the contract’s expiry later in the session.

“You had an oil market that got a boost at the beginning of the year, partially on holiday consumption, partially on cold weather ... but now it’s back on continuing dismal economic data,” said Harry Tchilinguirian at BNP Paribas.

Oil was at $147 a barrel in July but has tumbled as the economic crisis had reduced global oil demand.

Lower rates

Another bout of bearish economic data appeared on Thursday with news that the number of U.S. workers filing new claims for unemployment benefits rose last week, suggesting the U.S. recession is deepening.

The European Central Bank cut interest rates by 50 basis points to 2 percent, citing clear further evidence of a significant slowing in the economy.

The slowdown is particularly marked in the United States, the world’s largest oil consumer.

The U.S. Energy Information Administration this week forecast a world consumption drop of more than 800,000 barrels per day (bpd) this year.

The American Petroleum Institute said on Thursday U.S. demand for crude oil and petroleum products slid 5.9 percent in December from a year earlier, with demand in 2008 dropping at the fastest rate in almost three decades due to high energy prices and the slumping economy.

U.S. crude stocks rose for the third consecutive week, by 1.2 million barrels to 326.6 million barrels, according to the EIA. Stocks at Cushing, Oklahoma, were up 800,000 barrels at 33 million barrels, a record storage level at the site.

The Organization of the Petroleum Exporting Countries has also cut its forecast for 2009 world oil demand.

“The considerable uncertainty about the course of the recovery implies the potential for further deterioration in world oil demand growth this year,” OPEC said in its Monthly Oil Market Report.

This could build a case for the producer group to cut output again. OPEC has already reduced supply by about 4 million bpd since September to try to halt the oil price slide.