West Texas Intermediate for October delivery lost as much as $1.25 to $45.04 a barrel on the New York Mercantile Exchange and was at $45.26 as of 1:04 p.m. London time.
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A Reuters poll forecast US commercial crude oil stocks likely rose last week after marking the largest plunge since 1999 in the previous week.
Oil has fluctuated since rallying in August amid speculation the Organization of Petroleum Exporting Countries and Russian Federation would agree on measures to stabilize the market at a meeting later this month.
“The world’s largest producer, Saudi Arabia, is lukewarm about a freeze, while Iran and Iraq are still increasing output following wars and sanctions and they’re unlikely to support a deal until they’re pumping at full capacity”.
On the demand side, the big drivers of growth – China and India – are wobbling, with stimulus from cheaper oil hovering around $US50 a barrel fading, while momentum from Europe and the U.S. has “slowed dramatically”. “Also, there are expectations that US inventories will post a big build as all the imports that were delayed (due to disruptions from a tropical storm) arrive”.
A sharp slowdown in global oil demand growth will put a lid on prices, according to the International Energy Agency, which said ballooning oil stocks and rising supply would also mean the crude market is likely to be oversupplied through the first six months of 2017. The outlook is not clear nor rosy, the agency said.
The agency also revised its oil demand growth for 2016 to 1.3 million barrels per day, which represents a drop of 100,000 barrels.
Meanwhile, OPEC now predicts that production from outside the group will rise in 2017, compared with a previous estimate for a decline, mainly due to new production from Kashagan, it said in its monthly report. It added that non-OPEC supply is expected to return to growth next year.
OPEC and other oil producers meet in Algeria on September 26-28 to discuss a crude production freeze.
Oil prices closed in the red on Wednesday, with WTI crude down about 3% and Brent crude lower by over 2.5% this afternoon.
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OECD total inventories built by 32.5 mb in July to a fresh record of 3 111 mb, the IEA said, as refinery activities reached a summer peak, crude oil inventories refused to decline until an exceptional storm-related draw hit the USA in late August. The IEA admits, “With the price of oil at current levels, one would expect supply to contract and demand to grow strongly”.
