Oil Prices Fall as China Growth Falls Short of Forecasts

Oil prices fell Friday and headed for a weekly loss after data showed that first-quarter economic growth in China, the world's No. 2 oil consumer, was the weakest in nearly three years, reinforcing concerns about slowing demand for petroleum.

A stronger dollar and a slip in U.S. consumer confidence in April also pressured oil prices. Caution ahead of talks between Iran and five permanent members of the U.N. Security Council plus Germany about Tehran's disputed nuclear program, and news of falling North Sea oil production, were expected to limit losses heading into the weekend.

"The Chinese numbers were a little bit disappointing ... [but] we're not heading into a new substantial downward trend," said Tony Machacek, an oil futures broker at Jefferies Bache Ltd. "There's still quite a few geopolitical issues knocking about."

Expiring May Brent crude fell 43 cents to $121.28 a barrel by 12:12 p.m. EDT (1612 GMT), after dropping as low as $120.77. Brent crude for June delivery slipped 58 cents to $120.94.

U.S. May crude fell 60 cents to $103.04, having traded from $102.61 to $103.90. Prices must finish below $103.31 to avoid posting a weekly loss.

The annual growth rate in China, the world's second-largest economy, eased to 8.1 percent in the first quarter, short of expectations and down from 8.9 percent in the previous quarter.

China's implied oil demand fell 2 percent in March compared to February, to the lowest level in five months, but was up 3.4 percent compared with a year ago, Reuters calculations based on preliminary government data showed.

Iran and the six world powers prepared for talks set for Saturday aimed at easing fears that a deepening dispute over Tehran's nuclear program could ignite a conflict and disrupt oil supply from the region.

The potential for supply disruption and tightening sanctions have helped push crude prices higher in 2012, and the EU's ban on importing Iranian oil set to start in July has already curbed Tehran's exports.

Skepticism that the revived talks can yield a successful result remains high among oil traders and analysts.

"The Iran premium should still provide substantial support as we head into the weekend because of uncertainty about how the talks will go," said John Kilduff, partner at Again Capital LLC in New York.

Also limiting losses, even in the face of higher production from Saudi Arabia and signs of slower global economic growth, has been lower North Sea output.

Crude oil output from 12 North Sea grades is set to fall an average 9.8 percent in May from the previous month, data compiled by Reuters showed.

A cargo of North Sea Forties crude oil loading in April has been delayed again, according to trade sources, as output glitches keep hampering the shipping schedule.

Top oil exporter Saudi Arabia stressed again Friday that it was determined to bring down high oil prices and was working with fellow OPEC members towards that goal.

"We are seeing a prolonged period of high oil prices," Oil Minister Ali al-Naimi said in a statement during a visit to Seoul.

"We are not happy about it. [Saudi Arabia] is determined to see a lower price and is working toward that goal."

A version of this article appeared in the print edition of The Daily Star on April 14, 2012, on page 5.