Oil prices slide after energy agency casts doubt over demand outlook
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 (IEA), and on worries that data expected later in the day would show US output rising, undermining Opec cuts.
Brent crude futures were down 72 US cents at $61.49 per barrel at 10.20am GMT, having fallen 1.5% on Tuesday, its largest one-day drop in a month.
US West Texas Intermediate (WTI) crude was at $55.12 per barrel, down 58c.
The Brent price has now shed nearly 5% 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.
On Tuesday, the IEA cut its oil demand growth forecast by 100,000 barrels per day for both 2017 and 2018 to an estimated 1.5-million barrels per day and 1.3-million barrels per day, respectively.
The demand slowdown could mean world oil consumption may not, as many expect, breach 100-million barrels per day in 2018, while supplies are likely to exceed that level.
The IEA report countered a regular market update from oil cartel Opec, which just a day earlier said 2018 would see a strong rise in oil demand.
Van Cleef said data from the US Energy Information Administration expected at 3.30pm GMT could weigh on prices if it confirmed the rise in US crude inventories reported by the American Petroleum Institute on Tuesday.
The API said that US 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 [show] 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 US output also pressured prices.
US oil production has already increased by more than 14% since mid-2016 to 9.62-million barrels per day and is expected to grow further.
The IEA said nonOpec production would add 1.4-million barrels per day of additional production in 2018.
This puts pressure on Opec, which has been withholding production along with some nonOpec producers including Russia, in a bid to end years of oversupply and defend crude prices.
Opec will meet on November 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 November 30 meeting could precipitate a sell-off," US bank Citi said.