Oil fell below $80 on Wednesday, as a report from the International Energy Agency (IEA) that warned of risks to demand did nothing to dent bearish sentiment caused by economic fears and a sharp fall in equity markets.
The IEA slightly increased its forecasts for global crude demand for this year and next in its August report from the previous month. The agency warned, however, that if the global economy proved weaker than expected, any rise in fuel consumption could be wiped out.
Commenting on the risks highlighted by the IEA, Christopher Bellew of Bache Commodities said: The weakness of gasoline in the United States shows not much evidence of demand recovery. The United States is the world's biggest oil consumer.
Mr. Bellew added, however, If there is very robust demand going into places like China, then we'll see the oil price moving a bit faster to the upside. China is the world's second-biggest oil consumer.
A Reuters poll suggested that U.S. government data later on Wednesday will show that stocks of gasoline and other oil products have risen, suggesting weakness in product demand in the world's largest oil consumer. But the same poll forecasts a fall in crude inventories.
U.S. crude for September delivery was down 83 cents at $79.42 a barrel at 0950 GMT. Front-month ICE Brent crude fell 89 cents to $78.71 a barrel.
A rise in equity markets last week helped crude to rise above $80, according to analysts. On Wednesday, Japan's Nikkei 225 ended sharply down, and European equities fell during early trading, hitting sentiment toward oil. .N225 .FTEU3
The U.S. government on Tuesday also modestly boosted its forecast for global oil demand growth this year and next, saying that developing countries would drive consumption despite a slower outlook for the U.S. economy.
In China, an industry association forecast an 11 percent growth in the country's apparent crude demand this year. However, in July the country's implied oil demand slowed as expected from double-digit growth in the first half as firms scaled back refinery output and crude purchases from June peaks.
Economic growth in China is slowing slightly, although it remains robust as the government steers credit growth back to normal.
(Additional reporting by Florence Tan; Editing by Jane Baird)