10/11/2011 10:31 EDT | Updated 12/11/2011 05:12 EST

Oil prices fall after OPEC cuts its demand forecast for this year and 2012

NEW YORK, N.Y. - Crude oil prices drifted lower Tuesday after OPEC cut its estimate for world oil demand for this year and said it expects no growth in demand in 2012.

Benchmark crude fell 47 cents to US$84.94 a barrel in late morning trading in New York. Brent crude, used to price many international kinds of oil, rose 17 cents to US$106.82 a barrel in London.

Oil prices had risen for five straight days before Tuesday. Fears that the world economy is headed toward a recession have eased and hopes that Europe is taking steps to resolve its debt crisis have risen.

"The only fundamentals that apply to oil are economic expectations and currency trends," said Walter Zimmerman, an analyst at ICAP. "Nothing else seems to matter."

OPEC said Tuesday that the weak world economy was taking its toll on oil demand, especially in developed countries. When the economy slows, demand for oil falls because drivers buy less gasoline, shippers buy less diesel and jet fuel and travellers stay home.

The Organization of Petroleum Exporting Countries said demand will be about 180,000 barrels per day less than it previously forecast for 2011 and 100,000 barrels per day less than forecast for 2012.

That would still be a record for world oil consumption, at just over 88 million barrels a day in 2011. Oil demand in developed countries has been flat or declining, but demand from the developing economies of Asia has been pushing world oil consumption higher.

OPEC said policies in China and India to curb growing oil consumption will lead to lower demand in those countries than originally forecast.

OPEC, which produces about a third of the world's oil, imposes production quotas on its 12 member countries in an effort to keep oil prices stable. It adjusts production up if demand rises and cuts production if demand falls.

Rich Ilczyszyn, senior market Strategist at MF Global, said he expects oil prices to rise or fall with the stock market in the coming weeks, adding that he does not expect prices to fall below US$75 per barrel or to rise much beyond US$90 a barrel.

On Tuesday stocks wavered between small gains and losses in morning trading in New York.

In other energy trading, heating oil fell two cents to US$2.8871 a gallon (3.79 litres) and gasoline futures rose two cents to US$2.7188 a gallon. Natural gas futures increased by two cents to $3.558 per 1,000 cubic feet.