While supply appears to have outpaced demand growth in 2015, keeping oil prices subdued at their current level of $44.23 a barrel for benchmark Brent while US sweet crude trades at $41.62, demand growth could slow next year, the IEA said, a factor that could be bearish for oil markets.
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WTI crude for December delivery dropped $1.01 to $40.74 a barrel on the NY Mercantile Exchange. “Last night’s API report was a huge surprise, not just because it was a build but because it was such a large build in crude inventories”.
Oil prices have lost about 40% in the past year as OPEC defends its market share against rivals, such as the US shale industry, which is faltering only gradually despite the price collapse.
At the same time, oil producers have hiked their short positions in Brent futures to record highs of nearly 1.3 million in a sign that they are increasingly hedging their production in expectation of falling prices.
USA gasoline was also battered, tumbling 4 percent, despite a weekly draw in the motor fuel’s stockpiles.
The Organization of the Petroleum Exporting Countries (OPEC) has upheld its outlook on the global demand for oil for this and next year, OPEC said in its Monthly Oil Market Report (MOMR) issued Thursday.
“Production remains at pretty good level here in the USA and across the world”, said Andy Lipow of Lipow Oil Associates.
“Oil market bears may choose not to hibernate”, the IEA said, especially if forecasts for a mild winter in Europe and the United States turn out to be true.
WTI prices had pared a few losses in the immediate wake of supply data, after trading at the bottom of its range earlier Tuesday.
The government report also showed that total oil production rose by 25,000 barrels to 9.185 million barrels a day.
The world has a 1.6 million barrel per day oil production surplus (supply minus demand) as the oil glut enters its 8th consecutive quarter (Figure 1).
Oil prices took another dive on Wednesday, moving below $43 USA a barrel after reports that crude oil stockpiles in the U.S. were increasing.
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According to OPEC, OECD stock levels now deviate from the five-year average by 210 million barrels.
