Oil dropped as the International Energy Agency changed its view on global oversupply, seeing a glut persisting into 2017.
Futures fell as much as 2.8 percent in New York. The oil surplus will last longer than previously thought as demand growth slumps and output proves resilient, the IEA said. U.S. crude supplies probably rose by 4 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. The nation had the biggest supply decline in 17 years the prior week when a tropical storm disrupted imports and offshore production.
“The IEA said the supply overhang will persist longer than previously expected,” said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. “Also, there are expectations that U.S. inventories will post a big build as all the imports that were delayed arrive.”
Oil has fluctuated since rallying in August amid speculation the Organization of Petroleum Exporting Countries and Russia would agree on measures to stabilize the market at a meeting later this month. All solutions are possible, Algeria’s energy minister said Friday when asked whether producers could raise output within the framework of a freeze. Rising OPEC production has offset the effect of declining supplies elsewhere, maintaining the oversupply, the IEA said.
Sluggish Demand
West Texas Intermediate for October delivery fell $1.06, or 2.3 percent, to $45.23 a barrel at 9:09 a.m. on the New York Mercantile Exchange. Total volume traded was 13 percent above the 100-day average.
Brent for November settlement declined 86 cents, or 1.8 percent, to $47.46 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $1.66 premium to WTI for November delivery.
For a story on the possible outcome of the OPEC meeting this month, click here.
Global oil consumption growth sagged to a two-year low in the third quarter as demand faltered in China and India, while record output from OPEC’s Gulf members is compounding the glut, the IEA said in the monthly report. As recently as last month, the agency had expected the market to return to equilibrium this year.
“This was a marked shift in outlook by the IEA,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. OPEC’s “long game got a little longer, implying the need for oil prices to remain lower for longer to spur the necessary adjustments in supply for the re-balancing of the market.”
Bearish Revisions
OPEC flipped its forecasts for rivals’ supplies in 2017, predicting an increase in output from outside the group instead of a decline, according to a monthly report Monday. Production from outside the group will grow by 200,000 barrels a day next year, compared to 150,000 a day expected a month ago.
U.S. gasoline stockpiles probably dropped by 1.3 million barrels last week, according to the median estimate in the Bloomberg survey before the EIA report. Nationwide crude supplies are at 511.4 million barrels, more than 100 million barrels above the five-year average, according to EIA data.
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