Oil price hits 8-month low as optimism fades

Oil prices extended losses on Tuesday as New York crude struck an eight-month low with euphoria fading over a bailout deal for Spanish banks, while OPEC maintained its demand forecast. Expectations that the Organization of the Petroleum Exporting Countries would raise its production quota at a meeting in Vienna this week also pressured prices, analysts said. New York's main contract, light sweet crude for delivery in July, hit an eight-month low of $81.07 a barrel in Asian trading hours before firming to $82.45 -- which was 25 cents lower compared with Monday's close. Brent North Sea crude for July shed 48 cents to stand at $97.52 a barrel in London midday deals. Oil prices fell for a second day "as fears that the eurozone debt crisis will engulf more countries and threaten petroleum demand reversed a rally sparked by Europe's plan to rescue Spanish banks," said Phillip Futures in a market commentary. "Also pressuring prices, top exporter Saudi Arabia said OPEC may need to raise oil output targets at its Thursday meeting in Vienna." OPEC's ministerial meeting Thursday could set the scene for further declines in oil prices as Saudi Arabia looks set to push through its plan to raise output quotas. The 12-member cartel, which pumps about one third of the world's crude supplies, left its 2012 world oil demand outlook almost unchanged on Tuesday, citing price volatility and pressure on the global economy. OPEC put 2012 demand at 88.69 million barrels per day (mbpd), up from its previous estimate of 88.67 mbpd. This year has "witnessed various economic developments worldwide that have placed much uncertainty on oil demand. This has been related to two main factors -- the turbulence in the world economy and the volatility in oil prices," it said in the group's latest monthly report. "The indicators do not point clearly towards a stabilising of the world economy. The economies of the US, Europe and, to a certain degree China are still slowing down mildly," it added. OPEC still expects 2012 demand as a whole to be up 900,000 bpd from last year's 87.79 mbpd. Its ministers meet Thursday in Vienna to review oil output levels against the backdrop of a weak global economy, fragile demand, oversupply and continued tensions over Iran's contested nuclear programme.