Oil prices settled lower on Thursday after the International Energy Agency (IEA) trimmed its forecast for energy demand growth this year, the third of the world's top forecasters to do so at a time of growing supplies.
The IEA cut its forecast of growth in global oil demand for the third straight month. The U.S. Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (OPEC) also revised their forecasts lower this week.
Sputtering economic growth in the United States and several major developing economies and a recession in parts of Europe have eroded demand for fuel at a time when oil production has been increasing rapidly, particularly in North America.
"There's an ongoing process of acknowledging that the underlying fundamentals are not supporting prices," said Timothy Evans, an energy analyst with Citi Futures Perspectives in New York.
U.S. crude oil inventories rose last week to their highest level since 1990, according to the EIA's weekly report on Wednesday.
"I'm going to go out on a limb here and say that anytime a market has a 22-year high in inventories, it's not a bull market," Evans said.
Gasoline stocks independently held in Europe's Amsterdam-Rotterdam-Antwerp hub climbed to their highest level in almost five years last week, data from analyst Patrick Kulsen showed on Thursday.
Brent prices declined more sharply than U.S. crude, narrowing the spread between Brent and U.S. West Texas Intermediate to a nine-month low of $10.59 at one point on Thursday, before settling at $10.76.
Brent May crude settled $1.52 lower at $104.27 a barrel, after touching a session low of $103.70. Brent's May contract expires on Monday.
U.S. May crude settled off $1.13 at $93.51 a barrel, well below its 50-day moving average of $94.33. It dropped as low as $93.06 during the session.
U.S. RBOB gasoline continued to sag, falling more than 3 cents to $2.83 a gallon. The benchmark distillate futures contract also fell nearly 5 cents to settle at $2.89 a gallon.
Oil prices slipped even as world stock markets rose for a fourth day, after receiving a lift from an unexpected drop in U.S. initial jobless claims last week. The Dow and the S&P 500 hit new all-time highs.
A weaker dollar, usually supportive for dollar-denominated commodities, did not prevent the price weakness in the oil futures complex.
LOWER DEMAND GROWTH EXPECTATIONS
The IEA on Thursday cut its forecast for global oil demand growth this year by 25,000 barrels per day (bpd) to 795,000 bpd, citing weaker-than-expected oil use in developed economies, particularly Europe and Japan, as well as Russia and India.
"A slightly weaker demand trend is forecast," the IEA, which advises industrialized countries on energy policy, said in its monthly report.
Geopolitical tensions in the Middle East and the Korean peninsula keep providing some support to oil even as prices drop on market fundamentals.
In London, foreign ministers from the G8 group of rich countries failed to patch up deep divisions over Syria or come up with a concrete plan on North Korea during a meeting on Thursday.
South Korea could become the second major buyer to face a halt in crude oil imports from Iran, as insurers broaden Western sanctions to refineries, sources involved with the matter said.
Talks last weekend between Iran and major powers yielded little progress in resolving the dispute over Tehran's nuclear program. (Additional reporting by Robert Gibbons in New York, Christopher Johnson in London and Ramya Venugopal in Chennai, India; Editing by David Gregorio and Dale Hudson)