Oil markets came under pressure because of the bearish oil market reports published by OPEC and the International Energy Agency (IEA) respectively.
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West Texas Intermediate futures, the USA oil benchmark, fell 2.6 percent to $45.09 a barrel as of 10:37 a.m. London time, after the IEA said the surplus in global oil markets will last for longer than previously thought. A barrel of benchmark crude was down $1.10, or 2.4 percent at $45.20 while Brent crude, the global standard, fell 93 cents, or 1.9 percent, to $47.42 a barrel.
The market was boosted later by uncertainty over a potential U.S. Federal Reserve rate hike this month that sent the dollar.DXY lower and equity markets higher. The S&P 500 (SPX) shed 34 points, or 1.6 percent, to 2,125, with all 10 of its major industry groups falling. The organization describes rapid technological change in the energy sector and the broader economy as boons, but laments that they may have exposed the sector and the associated critical infrastructures to substantial risks. The Nasdaq composite dropped 28 points, or 0.5 percent, to 5,184. The IEA said oil demand growth was slowing while supply was rising, meaning the glut was now due to linger “at least through the first half of next year”.
Oil has fluctuated since rallying in August amid speculation the Organization of Petroleum Exporting Countries and Russian Federation would agree on measures to stabilize the market at a meeting later this month. The increase by Iran, which has been recovering from years of economic sanctions following the worldwide agreement limiting its nuclear program, has been swifter than the IEA expected.
“As for the market’s return to balance – it looks like we may have to wait a while longer”, it said.
“From that perspective, we’re getting a bit of a sell-off in oil”, CMC Markets strategist Jasper Lawler said.
Following Brainard s speech at the Chicago Council on Global Affairs, Fed futures prices showed an 85 percent probability that the current target rate of 0.25-0.5 percent will remain unchanged following next week s meeting, up from 76 percent Friday.
“The IEA said the supply overhang will persist longer than previously expected”, said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Conn.
OPEC Secretary-General Mohammed Barkindo told APS that OPEC was not seeking a definite price range for oil, but rather “sustainable stability” for the market. The IEA said stockpiles would continue to grow worldwide.
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“The picture of the supply side is equally confounding”. But, I do not agree when IEA says that demand growth from India and China is slowing down.
