The price of oil fell to near $94 a barrel Thursday, as an unexpected rate cut by the European Central Bank strengthened the dollar and an OPEC report depicted abundant global supplies.
By mid-afternoon in Europe, benchmark U.S. crude for December delivery was down 57 cents to $94.23 a barrel on the New York Mercantile Exchange. On Wednesday, it added $1.43 to close at $94.80 a barrel. That was still about 9 percent below its Oct. 2 close of $104.10.
Aiming to encourage Europe's modest growth rate, the ECB cut its benchmark interest rate to a record low 0.25 percent, a move not generally expected until at least next month. The cut weakened the euro and strengthened the dollar, making commodities like crude more expensive for traders using currencies other than the U.S. currency. The euro was down to $1.3365 from $1.3520 before the rate cut was announced.
Meanwhile, the Commerce Department said the U.S. economy grew 2.8 percent from July through September compared with the same period in 2012, nearly a percentage point higher than predicted. "Besides the unexpectedly strong GDP figures, the ECB surprisingly cut interest rates which led to a jump in the dollar," said analyst Daniel Briesemann at Commerzbank in Frankfurt. "This is driving commodity prices down, not only oil."
Until the rate cut, the oil market had been supported by news of a drop of 3.8 million barrels in U.S. gasoline supplies last week, almost four times the decline analysts were expecting, as well as a strong rise in demand for distillates, which includes diesel and heating oil.
A report from some of the world's key oil producers forecasting rising energy supplies in the coming years also weighed on prices. The Organization of Petroleum Exporting Countries said it expects demand for its crude oil to fall to 29.2 million barrels a day in 2018 from 30.3 million barrels a year this year. OPEC said rising supplies from other sources, such as Canadian oil sands, crude from Latin America and the increased use of biofuels would contribute to the fall in demand for its own output.
"This year's (report) demonstrates again that there is no shortage of oil and resources are plentiful," OPEC Secretary General Abdullah Al-Badry said in the group's 2013 World Oil Outlook report. "Increasing global oil demand is supported by an expanding diversity of supply sources."
OPEC also predicted that global oil demand would rise from 81.2 million barrels a day in 2013 to 89.7 million barrels a day in 2020 and 100.2 million barrels a day in 2035. At the same time, renewables and other fuels were seen driving down the share oil has in global energy use, from 32.2 percent in 2010 to 26.3 percent in 2035, with natural gas making the largest gains.
Brent crude, the international benchmark, was down $1.15 at $104.09 a barrel on the ICE Futures exchange in London. In other energy futures trading on Nymex: — Wholesale gasoline fell 2.78 cents to $2.5202 a gallon.
— Heating oil lost 1.98 cents to $2.8498 a gallon. — Natural gas gained 8 cents to $3.578 per 1,000 cubic feet.