Oil prices wavered Tuesday after OPEC cut its estimate for world oil demand for this year and said it expects no growth in demand for 2012.
After falling in early trading, benchmark crude rose 40 cents to finish at $85.81 per barrel in New York. Brent crude, used to price many international kids of oil, rose $1.40 to end at $108.05 a barrel in London.
Oil prices have risen for six straight days as fears that the world economy is headed toward a recession began to ease. Also, hopes are rising that Europe is taking steps to resolve its debt crisis.
In morning trading, a lower demand forecast for oil from OPEC pushed prices slightly lower, but oil later reversed course and rose slightly, along with the stock market.
"The stock market has been leading oil prices around by the nose," said Walter Zimmerman, an analyst at ICAP.
The stock market is being used by oil traders to gauge economic hopes, Zimmerman said. "The only fundamentals that apply to oil are economic expectations and currency trends," he said. "Nothing else seems to matter."
OPEC said Tuesday that a weak world economy was taking its toll on oil demand, especially in developed nations. When the economy slows, demand for oil falls because drivers buy less gasoline, shippers buy less diesel and jet fuel, and travelers stay home.
The Organization of Petroleum Exporting Countries said demand will be about 180,000 barrels per day less than it forecast for 2011 and 100,000 barrels per day less than forecast for 2012.
That would still be a record for world oil consumption, though, at just over 88 million barrels per day, for 2011. Oil demand in developed nations 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 nations in an effort to keep oil prices stable. It adjusts production up if demand rises, and cuts production if demand falls in an effort to keep prices up.
Rich Ilczyszyn, Senior Market Strategist at MF Global, expects oil prices will rise or fall with the stock market in coming weeks. He does not expect the price to fall below $75 per barrel or to rise much beyond $90 per barrel. Crude has stayed in that range for the last two months.
In other energy trading, heating oil was virtually unchanged at $2.9041 per gallon and gasoline futures rose 5.23 cents to finish at $2.7476 per gallon. Natural gas futures increased by 7.5 cents to end the day at $3.616 per 1,000 cubic feet.
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