Futures were trading lower, then took a sharp leg down after the IEA released its closely watched monthly report.
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Oil prices ticked higher this afternoon, but the gains were limited by news of returning supply from strife stricken Opec members Nigeria and Libya.
In its September oil market report, the organisation said it anticipated global demand growth to rise by 1.3m barrels a day in 2016, 100,000 below the previous forecast. Analysts had projected an increased of 1.5 million barrels.
The downsized demand forecast drove crude prices lower, said Jim Ritterbusch, president of Ritterbusch & Associates. The U.S. benchmark has traded as low as $34 a barrel this year and neared $53 a barrel in June. USA stockpiles increased by 1.44 MMbbl last week, the industry-funded American Petroleum Institute was said to report. Global benchmark Brent Crude Oil futures were up 24 cents, or +0.50 percent at $47.34 per barrel.
Global oil supply was down by 0.3 million barrels a day in August as non-OPEC production was down by 0.3 million barrels per day vs. a 2015. The US government will issue official inventory data later on Wednesday.
The IEA’s comments follow a surprisingly bearish outlook from the Organization of the Petroleum Exporting Countries on Monday that also pointed to a larger surplus next year due to new fields in non-member countries.
“Long-suffering oil bulls will now turn nervously to the US EIA’s commercial crude inventory numbers to be released this evening in NY”, he said.
Analysts expect USA government data for the latest week on Wednesday to show a stockpile build of 3.8 million barrels of crude. The cartel forecast that output from outside the group would only contract by 610,000 barrels a day – following an upward revision of 180,000 barrels a day from August, to average 56.32 million barrels a day. Last week’s revelation that the world’s two largest oil producers, Russian Federation and Saudi Arabia, have agreed to act together to stabilize global oil output helped shore up prices though it remains unclear what the two have in mind.
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As such, crude oil futures are likely to hold below $50 despite a recent agreement between Russian Federation and Saudi Arabia to curb supplies in the event prices go much lower.
