OIL?S NOT WELL:  A worker checks the valves at Al-Sheiba oil refinery in the Iraq city of Basra. Picture: REUTERS/ESSAM AL-SUDANI
OIL?S NOT WELL: A worker checks the valves at Al-Sheiba oil refinery in the Iraq city of Basra. Picture: REUTERS/ESSAM AL-SUDANI

Singapore — Oil prices fell more than 1% on Wednesday, continuing Tuesday’s slide after the International Energy Agency (IEA) cast doubt on the past few months’ narrative of tightening fuel markets.

Brent crude futures were at $61.44 a barrel at 4.13am GMT, down 77c or 1.24% from their last close.

US West Texas Intermediate (WTI) crude was at $55.10 a barrel, down 60c or 1.1%.

The price falls mean that crude prices are now down by about 5% since hitting 2015 highs last week, ending a 40% 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 sell-off in other commodities," said Sukrit Vijayakar, director of energy consultancy Trifecta.

The IEA on Tuesday cut its oil demand growth forecast by 100,000 barrels a day for this year and next, to an estimated 1.5-million barrels a day in 2017 and 1.3-million barrels a day in 2018.

"The oil market faces a difficult challenge in the first quarter of 2018, with supply expected to exceed demand by 600,000 barrels a day followed by another, smaller, surplus of 200,000 barrels a day in the second quarter," the IEA said.

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

The IEA report countered the Organisation 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 to November 10, to 461.8-million barrels.

US government inventory data is due later on Wednesday.

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 a day and is expected to grow further. The latest government data will be issued on Wednesday.

The IEA said non-Opec production would add 1.4-million barrels a day 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 and some non-Opec producers including Russia have been withholding production this year to end years of oversupply.

The deal expires in March 2018 but Opec will meet on November 30 to discuss policy, and it is expected to agree an extension of the cuts.

Reuters

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