Lower prices fueling higher oil consumption: IEA

But sharp price falls are beginning to encourage demand and the IEA forecast world oil demand would grow by 1.6 million barrels per day this year, up 200 000 bpd from its previous estimate and the fastest pace in five years. At the Multi Commodity Exchange, crude oil for delivery in August contracts shed Rs 20, or 0.73%, to Rs 2,738 per barrel in 2,159 lots.

Benchmark U.S. crude fell $1.88, or 4 percent, to settle at $43.08 a barrel in New York on Tuesday, its lowest close since March of 2009. Previously, China has maintained significant crude reserves, and in July its total crude imports amounted to around 7.3 million barrels per day (bpd).

Nymex light, sweet crude futures for delivery in September traded at $42.05 a barrel recently, down 18 cents in the Globex electronic session.

As a result of losses “triggered by China’s stock market slump” and global supply glut, US crude prices reported their biggest monthly drop since the 2008 financial crisis, with Texas light sweet declining to $47.12 per barrel on 31 July.

Brent futures were down 26 cents at $48.92, more than 25 percent below their last peak in May.

The latest decline came as the Organization of Petroleum Exporting Countries or OPEC said its production went up to a three-year high.

Oil prices continued to fall yesterday as China allowed its currency to drop further and its industrial output fell short of expectations just as oil production hit multi-year highs.

Analysts have said the move is an attempt by the cartel’s kingpin Saudi Arabia to defend its market share as it fends off competition from US shale oil.

U.S. oil companies added more oil rigs this week despite the plunge in crude prices, marking the fourth straight week of an uptick in the rig count.

Fresh speculation that the US central bank will raise interest rates soon after the release of solid retail sales data has also boosted the dollar, which is bad news for oil prices.

“If the agreement is implemented and sanctions relief occurs, it will put additional Iranian oil supplies on a global market that has already seen oil inventories rise significantly over the past year”, the EIA said.