U.S. oil prices tumbled on Wednesday, continuing Tuesday’s slide after the International Energy Agency (IEA) cast doubts over the past few months’ narrative of a tightening fuel market.
LONDON: Oil prices slipped for the fourth day in a row on Wednesday on a gloomy outlook for oil demand growth from the International Energy Agency and worries that data expected later in the day would show U.S. output rising, undermining OPEC cuts.
Brent crude futures were down 72 cents at US$61.49 per barrel at 1020 GMT, having fallen by 1.5 percent on Tuesday, its largest one-day drop in a month.
U.S. West Texas Intermediate (WTI) crude was at US$55.12 per barrel, down 58 cents.
The Brent price has now shed nearly 5 percent in value since hitting its highest since mid 2015 last week. Losses were compounded on Tuesday after an unexpectedly gloomy global demand outlook from the Paris-based IEA.
“Yesterday’s drop had to do with the world energy outlook, which was to me a bit of a surprise,” said Hans van Cleef, senior energy economist at ABN Amro.
The IEA on Tuesday cut its oil demand growth forecast by 100,000 barrels per day (bpd) for both 2017 and 2018 to an estimated 1.5 million bpd and 1.3 million bpd respectively.
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 a regular market update from the Organization of the Petroleum Exporting Countries, which just a day earlier said 2018 would see a strong rise in oil demand.
Van Cleef said data from the U.S. Energy Information Administration expected at 1530 GMT could weigh on prices if it confirms the rise in U.S. crude inventories reported by the American Petroleum Institute on Tuesday.
The API said that U.S. crude inventories rose by 6.5 million barrels in the week to Nov. 10 to 461.8 million, confounding expectations for a drop of 2.2 million barrels .
“If data this afternoon (shows) a build in inventories rather than a draw, that could be used as an argument to sell some of the extensive long positions,” van Cleef said.
On the supply side, rising U.S. output also pressured prices.
U.S. oil production has already increased by more than 14 percent since mid-2016 to 9.62 million bpd and is expected to grow further.
The IEA said non-OPEC production will add 1.4 million bpd of additional production in 2018.
This puts pressure on OPEC, which has been withholding production along with some non-OPEC producers including Russia in a bid to end years of oversupply and defend crude prices.
OPEC will meet on Nov. 30 to discuss policy and is expected to agree an extension of these cuts.
“Anything less than a full nine-month extension delivered at the Nov. 30 meeting could precipitate a sell-off,” U.S. bank Citi said.
(Reporting by Henning Gloystein; Editing by Joseph Radford and Hugh Lawson)