After reaching highs of $126 a barrel, oil prices fell sharply as fears of a slowdown in global oil demand dominated the market, taking over from the bullish concerns over Middle East supply that had pushed prices upwards in the last few weeks.

May Brent future price lost $3.06 to $120.92 a barrel on 13 April, while US benchmark West Texas Intermediate (WTI) contracts fell $3.67 to $106.25 a barrel.

The 12-crude basket of exports from the member states of the international oil producers group Opec traded at $116.70 a barrel on 13 April, the last date for which prices were available.

In its April report Opec forecasts the world economy to grow by 3.9 per cent in 2011, a downward revision of 0.1 per cent due to the impact of the earthquake and tsunami in Japan. World oil demand is forecast to grow by 1.4 million barrels a day in 2011, following an increase of 2 million b/d in 2010. Risks to the forecast remain, particularly from higher oil prices, which are likely to have a slightly negative impact on transport fuel demand worldwide. Demand for Opec crude in 2010 is estimated at 29.5 million b/d.

Analysts at Barclays Capital continue to hold the view of robust fundamentals, despite the high level of spare capacity compared with 2008, particularly with the potential for the struggle in the Middle East to take a turn for the worse providing further supply outages.Opposition forces controlling much of eastern Libya say they are exporting some crude oil from its fields, which are restricted to pumping approximately 100,000 barrels a day (b/d). Libya’s output previously totalled 1.6 million b/d.

“In our view, high oil prices are yet to show any considerable impact on oil demand, either in the OECD or in the non-OECD”, says a 13 April report.

Inventories in the world’s largest consumer continue to rise, hitting more than 359 million barrels according to the US Department of Energy.