After two months of unusual calm on the markets, stocks have whipsawed over the last few days.
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“Long suffering oil bulls will now turn nervously to the U.S. EIA’s commercial crude inventory numbers to be released this evening in NY”, said OANDA’s senior market analyst Jeffrey Halley.
U.S. West Texas Intermediate crude fell $1.25, or 2.7 per cent, to $45.04. “It’s a risk-off trade day”. Brent crude, the benchmark for Global oil prices, slid 1.22 dollars, or 2.5%, to 47.10 dollars a barrel in London. The global benchmark crude was at a $1.54 premium to WTI for November.
The IEA’s Oil Market Report for September marked a shift from last month, when it predicted the oil market could soon return to balance amid deep output cuts by non-OPEC producers and healthy global demand for crude oil.
According to the IEA, OPEC crude production edged up to 33.47 mb/d in August – testing record rates as Middle East producers opened the taps. The IEA had previously expected the market to show no surplus in the second half of this year. That’s pushing the price of oil down and sending energy companies solidly lower.
The IEA said even with a modest weather-related uptick forecast for the end of the year, oil demand growth in 2016 would struggle to get above 1.3 mb/d.
“Recent pillars of demand growth – China and India – are wobbling”, the IEA noted. “After more than a year with oil hovering around $50 a barrel, the [economic] stimulus from cheaper fuel is fading”. “Refiners are clearly losing their appetite for more crude oil”.
The cartel expects non-OPEC supply to rise by 200,000 bpd in 2017, as against a previous forecast of 150,000-bpd decline. The estimate is “marginally” higher than last month, driven by the stronger-than-expected performance of Norway and Russian Federation. Oil prices were falling back once more after the commodity rallied for most of August on hopes of a deal at a coming meeting between OPEC and Russian Federation to limit output.
“OPEC is trapped”, said Olivier Jakob, managing director of consultants Petromatrix GmbH in Zug, Switzerland.
Non-OPEC supply is expected to rebound next year, after declining this year. Higher output in OPEC countries almost completely offset the decline, the IEA says.
“Saudi Arabia’s elevated oil production has allowed it to overtake the U.S. and become the world’s largest oil producer”, the Paris-based IEA said in its monthly report on Tuesday.
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Global refinery runs are expected to grow at their slowest pace in at least a decade this year, which will curb appetite for crude oil, just as inventories across the OECD rose to a fresh record high of 3.111 billion barrels, the report said.
