Diesel futures fell 4.12 cents, or 2.9%, to $1.3817 a gallon, the lowest settlement since August 10.
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The Paris-based agency said demand is slowing in countries that were previously driving the market, such as India and China. USA crude stockpiles increased by 1.44 million barrels last week, the industry-funded American Petroleum Institute was said to report.
“This was a marked shift in outlook by the IEA”, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London.
Oil prices rebounded in early Asian trade on Thursday after falling about 3% in the previous session, supported by an unexpected fall in USA crude inventories.
Commerzbank said in a note the delay in rebalancing is largely due to a rise in production from members of the Organization of the Petroleum Exporting Countries and that the market would be balanced already if OPEC maintained its production at May’s levels. Producers are expected to meet in Algeria on the sidelines of the September 26-28 International Energy Forum.
The IEA and OPEC reports also confirm many observers’ expectations regarding how long it will take for supply and demand to achieve equilibrium.
The Canadian bonds have been closely following developments in oil markets due to their impact on inflation expectations, which are well below the Bank of Canada’s target.
Following a decline of nearly 3% on Tuesday, crude oil prices extended their decline on Wednesday’s trading, waning nearly 2% amid traders concerns over rising supplies. The agency predicts oversupply and low prices will continue at least through the first half of 2017, but it calls the supply side of the situation “confounding”. Analysts had projected an increased of 1.5 million barrels.
US output in August stood at 12.2 million barrels a day, including natural gas liquids, according to the IEA.
“Oil remains under pressure again today after the IEA reported that oil demand growth will be lower than expected this year”, said Craig Erlam, senior market analyst at Oanda trading group. Exxon Mobil Corp. was said to be ready to resume shipments of Nigeria’s biggest export grade.
OPEC and other oil producers meet in Algeria on September 26-28 to discuss a crude production freeze. The benchmark US crude, West Texas Intermediate, fell to $44.90 a barrel, down $1.39 or 3%.
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The oil glut isn’t going away anytime soon.
