As the market eyed a producers’ meeting later this month for some reprieve, the International Energy Agency (IEA) said Tuesday that growth in oil demand was slowing while supply was rising. The U.S. government will issue official inventory data on Wednesday.
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OPEC pointed to the continuing resilience of U.S. shale drillers who continue to produce oil, despite expectations that the industry would be crippled by the two year oil crash.
World oil stockpiles will continue to accumulate through 2017, a fourth consecutive year of oversupply, according to the IEA. The agency last month predicted the market would return to equilibrium this year. It reduced growth estimates for this year by 100,000 barrels a day to 1.3 million a day, citing a “dramatic deceleration in China and India” this quarter coupled with “vanishing growth” in developed economies.
“For 2016, a gain of 1.3 mb/d (million barrels per day) is expected – a downgrade of 0.1 mb/d on our previous forecast due to a more pronounced 3Q16 slowdown”.
“The focus of the market is squarely on supply”, said Evan Lucas, a market strategist at IG Ltd.in Melbourne. Global benchmark Brent Crude Oil futures were up 24 cents, or +0.50 percent at $47.34 per barrel.
But, said the IEA, OPEC production edged up last month to a near-record supply level, which “just about offset steep non-OPEC declines”.
U.S. West Texas Intermediate futures were up 29 cents at $45.19 a barrel. And output averaged 10.36 million barrels a day from January to August, up 200 kilobarrels a day from the prior year. Both Iran and Saudi Arabia and have added 1m b/d each over the last two years, more than offsetting the 1.4m b/d fall in other parts of the world. The estimate is “marginally” higher than last month, driven by the stronger-than-expected performance of Norway and Russian Federation.
He noted that low oil prices could help to put the brakes on production.
The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week showed a 1.4-million-barrel increase in crude supplies, a 2.4-million-barrel decrease in gasoline stocks and a 5.3-million-barrel increase in distillate inventories, according to a market participant.
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Brent crude has increased 27 percent this year after touching a 12-year low in January as production fell in the US and demand rose, helping erase some of the oversupply.
