Oil prices slide after IEA doubts demand outlook

Oil prices continued to slide on Wednesday after the International Energy Agency (IEA) cast doubts over the past few months’ narrative of tightening fuel markets.

Brent crude futures LCOc1 were at $61.67 per barrel at 5 pm Beijing time, down 54 cents from their last close.

US West Texas Intermediate (WTI) crude CLc1 was at $55.18 per barrel, down 52 cents.

The price falls mean that crude prices are now down by around 5 percent since hitting 2015 highs last week, ending a 40 percent rally between June and early November.

“Crude prices dropped dramatically after the IEA forecast a gloomy outlook for the near future ... The drop was arguably exacerbated by a global selloff in other commodities,” said Sukrit Vijayakar, director of energy consultancy Trifecta.

“The oil market faces a difficult challenge in [the first quarter of 2018] with supply expected to exceed demand by 600,000 bpd followed by another, smaller surplus of 200,000 bpd in [the second quarter],” the agency said.

The demand slowdown could mean world oil consumption may not, as many expect, breach 100 million bpd next year, while supplies are likely to exceed that level.

The IEA report countered the Organization of the Petroleum Exporting Countries (OPEC), which just a day earlier said 2018 would see a strong rise in oil demand.

Vijayakar said a reported increase in US crude inventories was also weighing on prices.

The American Petroleum Institute (API) said on Tuesday that US crude inventories rose by 6.5 million barrels in the week leading up to November 10 to 461.8 million.

The IEA said non-OPEC production will add 1.4 million bpd of additional production in 2018.

The IEA’s outlook pressures OPEC to keep restraining output in order to defend crude prices, which its members rely on for revenue.

OPEC will meet on November 30 to discuss whether or not to extend a deal on cutting production that is due to expire in March 2018.