Over the previous two sessions, oil prices fell six per cent, pressured by data showing large weekly builds in U.S. petroleum products, and forecasts by the world’s energy watchdog and OPEC that signalled the global crude glut could persist into 2017.
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The renewed pressure on prices follows a period when oil prices have recovered from multiyear lows and subsequently broadly stabilized.
US crude for October delivery fell $1.39, or 3%, to $44.90 a barrel on the New York Mercantile Exchange. Brent crude lost 1.8 percent at $46.26 a barrel. “But the market seems to be more concerned at the moment about the possibility of a sharp increase of the supply from Libya”.
Bond prices fell. The yield on the 10-year Treasury note rose to 1.72 percent.
The Dow Jones industrial average fell 258 points, or 1.4 percent, to 18,066. Apple shares bucked the trend, trading 2.4% higher. Many attributed the previous drop to bad weather that delayed the arrival of oil cargoes from overseas to U.S. ports.
The oil market dragged much of the stock market down.
United States crude supplies fell to 510.8 million in the week ended September 9, according to EIA data. Almost half of this year’s over-production, but still adding over 3/4 of a million barrels a day to global oil stockpiles. The U.S. government will issue official inventory data on Wednesday, which is expected to show an increase of 4 million barrels last week – the biggest increase since April.
Iran, meanwhile, has been “swift” to ramp up its production after the lifting in January of years of nuclear-linked sanctions. That’s down to growth of 1.6 million in the first quarter of this year, 1.4 million in the second quarter and, “worryingly”, a projected growth of 800,000 barrels in the third quarter of this year, he said. OPEC also revised upward its own forecast for global supplies on Monday.
Market participants are also awaiting federal data on US crude stockpiles. It now expects the oil market to rebalance in 2017, but its previous predictions had pointed to the end of 2016.
Investment in global energy projects fell eight percent previous year on sliding expenditure in oil and gas upstream projects, despite robust spending in renewables, electricity networks and energy efficiency, the Paris-based IEA said in a report.
Global demand growth is slowing at a faster pace than the group initially predicted.
The IEA’s scenario would mean prolonged pain in the oil industry, while promising modest fuel costs for consumers.
Adding to the downward pressure was the comment from Libya’s National Oil Corporation that it would immediately start working to resume crude exports from ports seized in recent days by forces loyal to eastern commander Khalifa Haftar. “It may well be the case that investment will fall in 2017”, Fatih Birol, the IEA’s executive director said in an interview.
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The agency called the supply side “confounding”. The key topic will be how to deal with the global supply glut.
