Crude Falls, Hovers Near $96 a Barrel

Reuters

LONDON, May 12 (Reuters) - Oil fell to around $111 a barrel on Thursday, extending the previous day's $5 slide, after the International Energy Agency cut its global demand forecast and China raised banks' reserve requirements ratio.

Gold and copper also fell and silver was set for its biggest two-week slide in nearly 25 years as another wave of selling hit commodities, exacerbated by the strength of the U.S. dollar.

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Brent crude fell $1.67 to $110.90 a barrel by 1131 GMT, adding to Wednesday's $5 drop, which was sparked by rising U.S. gasoline inventories and falling domestic demand for the fuel. U.S. crude lost $2.50 to $95.71.

In a monthly report, the IEA cut its 2011 global oil demand growth forecast to 1.29 million barrels per day (bpd) from 1.43 million bpd, citing high prices and a weaker economic outlook for developed economies.

"We clearly have seen demand growth slowing compared to last year's level and we're seeing it very much concentrated where the price feed through is most direct, notably in North America in terms of gasoline," said David Fyfe, head of the IEA's Oil Industry and Markets division.

Oil also fell after the Chinese tightening move, which comes despite initial signs of slowing in the economy. China is the world's second-largest oil consumer and the source of much of its demand growth.

A surprise increase in U.S. gasoline inventories reported on Wednesday had sent gasoline futures down almost 8 percent and fuelled the second rout in a week on commodity markets. U.S. crude stocks also rose, government data showed.

BEARISH CHARTSThere could be further losses ahead, according to technical price charts. Brent could fall toward $105.21, according to Reuters analyst Wang Tao. It fell as low as $105.15 on May 6.

"If you see it from a fundamental point of view, the price is still too expensive and far from an appropriate value," said Ken Hasegawa, a commodity derivatives manager at Japan's Newedge brokerage.

Oil had staged a modest bounce before the IEA report was released, clawing back about $1, as investors focused on relatively strong demand growth in Asia.

Implied oil demand in China, the world's second-largest crude consumer, reached its third-highest level on record last month, but year-on-year growth slipped to 8.8 percent after six consecutive months of double-digit gains.

Wednesday's tumble in prices drove oil volatility to its highest close since mid-March as prices posted their second rout in less than a week.

Even after the latest decline, Brent crude is up 17 percent this year, having jumped to a 32-month high above $127 last month, driven in part by fighting in Libya and the loss of its crude exports.