Oil fell below $120 a barrel on Wednesday to the lowest in almost two months, pressured by rising U.S. inventories and concern about the strength of global demand.
The U.S. Energy Information Administration (EIA) on Tuesday cut its 2012 world oil demand growth forecast and later on Wednesday releases its weekly U.S. supply report, which analysts expect will show a further increase in crude stocks.
North Sea Brent was down 30 cents at $119.58 a barrel by 0849 GMT, after falling as low as $119.05, the lowest since Feb. 17. Its 2.27 percent slide on Tuesday was the biggest one-day percentage loss since Dec. 14. U.S. crude was up 47 cents to $101.49.
“The broader markets, including oil, are on a risk-off mode at this point because of the series of negative numbers we have seen recently,” said Natalie Robertson, an analyst at ANZ. “Oil markets would be flat to lower over the next few days, with support coming in if there are worries on the supply side.”
European shares posted modest gains on Wednesday, steadying after steep losses in the previous session, while the dollar declined and copper staged a shaky rebound.
Global benchmark Brent has risen 11 percent this year, supported by supply outages and the threat of supply disruption from Iran, although in recent sessions concern about rising inventories and demand has come to the foreground.
Later on Wednesday, the EIA is scheduled to release its weekly U.S. supply report. Analysts expect U.S. crude stockpiles to rise, building on the biggest two-week increase in more than a decade.
Oil industry group the American Petroleum Institute on Tuesday reported crude stocks rose 6.6 million barrels, more than three times the forecast increase of 2.1 million barrels.
On global demand, the EIA on Tuesday cut its 2012 world oil demand growth forecast by 170,000 bpd to 890,000 bpd. Monthly reports from two other closely watched forecasters, the International Energy Agency and OPEC, are due on Thursday.
Oil also fell as concerns about European debt have resurfaced. Spain’s banks may need more capital if the economy deteriorates, the head of the central bank said.
Iran has agreed to renew discussions with the permanent members of the U.N. Security Council – the United States, Russia, China, Britain and France – plus Germany last month, more than a year after previous talks failed.