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Brent crude falls after World Bank cuts growth forecasts

Thursday, January 19, 2012 by Proactive Investors

From London, oil futures were headed in different directions today as while US crude prices were on the rise on supply worries, Brent crude fell in London after the World Bank projected a recession in the euro zone.

Today’s report from the World Bank offered a rather gloomy economic outlook with the bank slashing its global growth forecast for the current year from 3.6 percent to 2.5 percent.

Developing economic are now expected to grow at 5.4 percent compared to the previous forecast of 6.2 percent, while the euro zone will see a 0.3 percent contraction, according to the updated forecasts.

Furthermore, the World Bank said oil prices could drop as much as 24 percent as a result of lower than expected demand.

Brent crude, which is more exposed to the European debt crisis, fell on the news. However, US crude futures were on the rise amid fears that Iran will block a key oil shipping route in response to widespread efforts to reduce oil imports from the Middle Eastern Country, which is accused of developing a nuclear weapon.

South Korea is currently in talks with Oman and the United Arab Emirates to secure oil supplies to help it reduce dependence on Iranian crude imports, which currently cover 10 percent of its oil requirements.

Meanwhile, the US is currently in discussions with Japan, also a major consumer of Iranian crude, in hopes to persuade the government to step up its efforts to cut Iranian crude imports.

Iran has previously threatened to block the Strait of Hormuz if an oil embargo is imposed, blocking a route that is used to transport about a fifth of the world’s oil.

Iraq, which is currently presiding over the Organization of Petroleum Exporting Countries (OPEC), today asked Iran to provide assurances that oil supplies through the Strait of Hormuz will not be blocked.Iraqi oil minister Abdul-Kareem Luaibi will head to Tehran tomorrow to hold negotiations with Iranian officials.

US light, sweet crude for February delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), rose 16 cents to US$100.87/barrel in morning trade in New York.

March Brent crude declined 34 cents to US$111.15/barrel on the ICE Exchange this afternoon.

Today’s top risers in the oil and gas sector were:

Ascent Resources (LON:AST), up 10 percent at 3 pence at midday

Cadogan Petroleum (LON:CAD), up 8.5 percent at 28.1 pence

Kea Petroleum (LON:KEA), up 8 percent at 4.72 pence

Urals Energy (LON:UEN), up 5.5 percent at 7.53 pence

Frontera Resources (LON:FRR), up 5.5 percent at 1.26 pence

The top fallers were:

Woburn Energy (LON:WBN), down 18 percent at 1.12 pence at midday

Oilex (LON:OEX), down 14.5 percent at 14.5 percent

Wessex Exploration (LON:WSX), down 9.5 percent at 5.87 pence

Pantheon Resources (LON:PANR), down 6.5 percent at 9.35 pence

Egdon Resources (LON:EDR), down 5.5 percent at 11.25 pence

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