The price rally was short lived as crude prices tumbled on Tuesday after the International Energy Agency (IEA) said slowing oil demand growth amid growing inventories and supplies could signal that the market will be oversupplied at least through the first half of 2017.
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“The process of shaving an additional $4.50 a barrel off of the crude benchmarks could require another couple of weeks”, said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
Brent crude settled down $1.22 or 2.5 percent, at $47.10 a barrel.
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. “The market remains well supplied and inventories could rise in the weeks ahead because of refinery maintenance”. It added that the forecast would have been even lower if it wasn’t for the 200,000 b/d premium it has included due to the expected return to a normal winter after last year’s mild temperatures. In Nigeria, ExxonMobil was said to be ready to resume shipments of Qua Iboe crude, the country’s biggest export grade, which averaged about 340,000 bpd in shipments past year.
The downsized demand forecast drove crude prices lower, said Jim Ritterbusch, president of Ritterbusch & Associates.
Gains in crude prices could also be capped by rising crude exports from Libya after the country’s National Oil Corporation (NOC) said on Tuesday it would immediately start working to resume crude exports from ports seized in recent days by forces loyal to eastern commander Khalifa Haftar.
While there are reasons to be cautious about whether the barrels will actually flow as anticipated, a resumption of those supplies – more than 800,000 barrels a day in all – could more than triple the global surplus that has kept prices at less than half their levels in 2014. Most now believe that markets won’t equalize until 2018. USA equity markets were down almost 2 percent, extending the bearish sentiment across risky markets. U.S. crude inventories dropped by 559,000 barrels in the week to September 9, defying analysts expectations of a crude build of 3.8 million barrels.
“Since May, however, we estimate that the USA has shut in 460,000 bpd of high-cost production, while the low-priced oil fields of Saudi Arabia have cranked out an extra 400,000 bpd”, the report added.
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Elsewhere in commodities, October natural gas contracts lost two cents to US$2.89 per mmBtu, December gold was up $3.30 to US$1,327.00 an ounce and December copper was US$2.14 a pound, up four cents. Diesel futures fell 1.86 cents, or 1.29%, to $1.4229 a gallon.
