Crude oil prices plunged after the International Energy Agency lowered its forecast for global oil demand for the sixth consecutive month on continuing weakness of the global economy.
The IEA slashed its outlook for growth by about 300,000 barrels a day in 2012. The agency forecasted oil consumption to grow at a lesser rate than previously expected -- about 800,000 barrels a day. That would represent less than one percent growth in 2012.
As a result, both March delivery of light, sweet crude and Brent crude prices fell. Brent crude was down about one percent, and sweet crude fell more than two percent. The most heavily traded contract on the Commodity Exchange Inc., was down about 1.3 percent.
"An uneasy balance characterized oil markets in January, with tensions surrounding Iran counteracting a weaker economic outlook," the IEA said in its report .
The IEA said that the lowered oil consumption is a result of the tempered predictions for global economic growth. Originally expecting a four percent growth, forecasts now have that at about 3.3 percent this year.
"This month's report dwells on recent economic downgrades, and resultant weaker oil products demand growth for 2012," the IEA said in its report. "This is providing a ceiling for otherwise stubbornly-high crude prices."
The IEA's report on the demand side follows a similar outlook reduction on the supply side by the Organization of Petroleum Exporting Countries on Thursday. OPEC said it expected 120,000 barrels a day of less demand in 2012 when it released its monthly oil report a day earlier.
The IEA report sent prices spiraling downward after gains in recent weeks. On Thursday, crude futures jumped more than $100 a barrel. The dollar's growing strength against the euro also pushed crude futures lower.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.