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Oil price plunge signals high uncertainty over economy: IEA

Oil is riding a "big dipper," with prices plunging again on uncertainty about debt levels in the West, signs of a slowdown in emerging markets and political paralysis, the IEA said on Wednesday.

business Updated: Aug 10, 2011 14:26 IST

Oil is riding a "big dipper," with prices plunging again on uncertainty about debt levels in the West, signs of a slowdown in emerging markets and political paralysis, the IEA said on Wednesday.

"Crude oil prices have plunged for the third time in three months," the IEA said, noting a drop of $12-15 dollars a barrel in about 10 days, as it cut its demand forecast for this year.

The International Energy Agency trimmed its estimate for global oil demand this year by 100,000 barrels per day because of a downward revision to demand in the second quarter, high prices and "slowing economic growth."

At the same time, it raised its 2012 forecast by 100,000 barrels per day because Japan will increase its energy consumption as it makes up for the loss of nuclear generated power in the aftermath of the devastating March earthquake.

Warning that the outlook is very volatile, the IEA said "August has a habit of springing both geopolitical and meteorological surprises, so the big dipper ride may still have further to run."

Oil prices were higher just before the IEA published its monthly report, at $81.02 per barrel for the benchmark US WTI contract, a gain of $1.72 dollars.