After some profit taking, the bears came in as the fears over a global glut once again clouded sentiment within the crude market after the International Energy Agency (IEA) on Tuesday warned that it may take longer for the oil market to re-balance.
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“However, the opposite now seems to be happening”, it said.
Oil prices rebounded slightly Thursday after tanking the previous day, but gains were capped by U.S. stockpiles data and the prospect of rising output in Libya and Nigeria, dealers said.
China and India, which had been key drivers recently of demand growth, are “wobbling”, it said, while a slowdown in the U.S. and economic concerns in developing countries have also contributed to the surprise development.
It said a slowdown in global oil demand growth accelerated in the third quarter of this year, dipping to 800,000 barrels, or 1.5 million barrels a day lower than the corresponding quarter last year. It followed an unexpected decline of 14.5 million barrels the previous week, the biggest draw in 15 years, due to Tropical Storm Hermine delaying oil arrivals into the U.S. Gulf Coast.
Earlier in the week, the Organization of the Petroleum Exporting Countries predicted that non-cartel producers such as the US and Norway will increase their production, and that global supply will outpace demand by an average of about 760,000 barrels a day in 2017. Moreover, the report also forecast that crude markets are poised to suffer from oversupply till the first half of the next year.
Meanwhile world oil supplies fell by 0.3 mb/d in August, dragged lower by non-OPEC, noted the IEA. Production was strong, in particular, in Kuwait and the United Arab Emirates, and Iraq continues to inch up its supplies.
IBD’S TAKE: Oil major Chevron is boosting spending on unconventional plays and is consolidating in a flat base.
Thirty-year USA yields held just below two-and-a-half-month highs at 2.49 per cent yesterday. The prices are creating lower highs and higher lows, suggesting a highly confused state in resolving market direction. Among them, the U.S., formerly the engine of non-OPEC supply growth, has particularly suffered.
Wall Street dropped with the price of oil after reports from OPEC and the International Energy Association showed the global glut won’t abate any time soon.
Oil prices dropped on Tuesday, after the release of the much-anticipated report.
Brent crude futures were down 76 cents, or 1.6%, at $46.34 US per barrel at noon ET Wednesday.
In the energy market, Brent crude was down 2.3 per cent, while U.S. crude fell three per cent.
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Oil prices plunged to the lowest level in almost a week on Tuesday after the International Energy Agency (IEA) predicted that global oil demand this year will be weaker than earlier expectations. A number of factors hit prices including worries over the scale of the economic slowdown in China and high supply levels from OPEC countries, notably Saudi Arabia, as they seemingly strove to drive USA shale gas producers out of business.
