Expected Decline in Demand Pressures Crude Oil

December Crude Oil futures continued to work lower on Tuesday after the International Energy Agency cut its forecast for oil-demand growth this year and in 2015. Its forecast called for 2014 oil-demand growth by 200,000 barrels a day to just 700,000 barrels a day, its weakest in five years.

The weakness in the Euro and British Pound helped drive up the U.S. Dollar which put pressure on December Comex Gold. The recovery in the equity markets also helped pressure gold prices while the economic uncertainty in the Euro Zone may have helped underpin the market.

The EUR/USD was also under pressure on Tuesday because of weak Euro Zone economic data. A slump in German economic sentiment surprised traders. The ZEW Indicator of Economic Sentiment for German dropped by 10.5 points in October and is now at -3.6 points. The long-term average is 24.5 so this current reading is bearish. The indicator decreased for the tenth consecutive time while turning negative for the first time since November 2012.

Experts believe the ZEW will continue to decline over the medium term. Factors contributing to the weakness include geopolitical tensions, weak economic developments in some parts of the Euro Zone, and weak incoming orders, industrial production and foreign trade

Germany also cut its GDP growth forecasts for this year and 2015. The German government now believes this year’s growth and next year’s will decline from 1.8% in 2014 to 1.2% and in 2015 from 2.0% to 1.8%.

September inflation data for France, Italy and Spain also fell short of expectations, further pressuring the Euro. Euro Zone industrial production also posted a worse-than-expected decline. The report was said production dropped 1.8% versus a pre-report estimate of 1.5%.

The GBP/USD fell after the U.K. government released weaker-than-expected inflation data. U.K. CPI data came in at 1.2%, missing the forecast of 1.4% and hovering just 0.1% above its September 2009 low. The weak economic data suggests the Bank of England will likely use this data to delay an interest rate hike.