Oil prices mixed as traders absorb IEA report

Brent North Sea crude for September fell 18 cents to 72.28 dollars a barrel in early afternoon London trade.

But New York’s main contract, light sweet crude for delivery in September, rose by 18 cents to reach 69.63 dollars a barrel.

Prices had skidded lower on Tuesday as data highlighted soft energy demand and on fresh doubts over the sustainability of a global economic recovery.

Oil demand is lagging behind inconclusive signs of global recovery from the economic crisis, the IEA said on Wednesday in a cool assessment of so-called ‘green shoots’ of economic growth.

Demand this year would be far weaker than last year, and an unexpectedly weak rally next year would fall far short of compensating for this, the International Energy Agency said.

The IEA also revised upwards expected global demand growth for oil this year by 190,000 barrels per day, and for next year by 70,000 barrels, because the outlook for Asian demand had risen for both years.

‘This barely dents the sharp demand contraction to 83.94 mbd expected this year, while growth in 2010 is slightly lower than previously estimated, at plus 1.6 percent or 1.3 mbd to 85.25 mbd,’ the report said.

The broad findings of the IEA report chimed with the overall assessment of the Organization of Petroleum Exporting Countries which reported Tuesday that world oil demand would decline slightly this year but begin to grow in 2010.

The IEA also said that the US driving season, a big factor in demand for petrol at this time of year, had ‘fizzled out,’ US industrial activity was still falling and global use of diesel fuel, which is used for trucks, transportation, and in generators, remained weak.

Later Wednesday, traders will digest the US Department of Energy’s report on crude inventories for the week ending August 7, as well as the outcome of the US Federal Reserve’s latest monetary policy meeting.

On the supply front, US crude stocks are expected to see an increase for the third week in a row.

Analysts expect the Fed to maintain rates at virtually zero percent and comment on its unprecedented efforts to pump prime the economy.

‘Markets will continue to watch the economic data for some hoped-for demand growth, and the (Fed) announcements Wednesday evening will provide the next major input,’ said Sucden anlayst Brenda Sullivan.