In Amenas

Oil prices today plunged on worries over the dwindling global economic prospect which could pull down demand, while the revival in supply concerns, following an Islamist militant attack on a gas field in Algeria, capped the decline.

Brent increased by 12 cents to $109.80 a barrel, while US oil slipped by 26 cents to $93.98, reported Reuters. The World Bank’s data, which reduced forecast for world growth in 2013 to 2.4%, a significant drop from its earlier forecast of three percent and marginally higher than 2.3% growth in 2012, has once again revived concerns over the global economy.

The Organisation of Petroleum Exporting Countries (OPEC) has reduced its demand outlook for its crude by 100,000 barrels a day to 29.65 million bpd in 2013, considering the trend that a weakening global economic activity may lead to poor energy demand.

The US Energy Information Administration (EIA) has also reduced its 2013 demand growth prediction by 20,000 bpd, having a further impact on the oil prices.

"The World Bank’s data reduced the forecast for world growth in 2013 to 2.4%."

Prices also came under pressure after data revealed that the car market in Europe slowed down to a 17-year low, and the possibility of another long battle in the US regarding the fiscal crisis has demoralised investor confidence heavily.

The support for oil prices, however, came from the rising supply concerns in the Middle East, after Islamist militants attack the In Amenas gas field in Algeria, which is operated by Algerian state oil company Sonatrach, along with British oil company BP and Norway’s Statoil.

The militants took 41 foreigners, including seven Americans, hostage, as retaliation for France’s intervention in Mali. The raiders reportedly killed two people, including a British and a Armenian citizen. Oil prices received additional support from a sudden drop in crude inventory in the US, the world’s biggest oil consumer.

According to weekly data from the US EIA on Wednesday, US crude stocks dropped by 951,000 barrels to 360.3 million barrels in the week to 11 January, while analysts had expected stocks to rise by 2.3 million barrels.

Image: In Amenas gas field in Algeria. Photo courtesy of Statoil.