February 26, 2018

Oil tanks as gloomy outlook from IEA undermines Opec optimism

16 November 2017, 02:18 | Frank Carlson

Oil tanks as gloomy outlook from IEA undermines Opec optimism

Four pumpjacks are silhouetted as they operate at the site of an oil well outside Williston North Dakota on Feb. 12 2015

Oil will continue growing as a source of energy for over two decades, with the US set to become the undisputed leader in crude and gas production, the International Energy Agency said Tuesday.

A pump jack is seen at sunrise near Bakersfield, California October 14, 2014.

Crude oil stocks in the US were seen down 2.850 million barrels, while distillates were expected to post a drop of 1.775 million barrels and gasoline inventories expected down 1.025 million barrels. The EIA data encouraged buying at session lows.

Secondly, a reduction in the cost outlook for a variety of upstream projects is behind the changes, meaning that more oil can be brought to the market at lower prices than in the past, the report said.

The API estimate are followed by official data from the Energy Information Administration on Wednesday. Increased refining rates could eventually reduce crude inventories.

Brent futures fell 95 cents, or 1.5 percent, to settle at $62.21 a barrel, while U.S. West Texas Intermediate (WTI) crude lost $1.06, or 1.9 percent, to end at $55.70, the lowest close for both contracts since November 3.

Brent for January settlement dropped 83 cents to $61.38 a barrel on the London-based ICE Futures Europe exchange.

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West Texas Intermediate crude have both shed about $3 a barrel, or almost 5 percent, from more than two-year highs struck last week. "This is a continuation of the strong demand growth we are seeing in our short term oil market analysis", the report said.

The Paris-based IEA cut its oil demand growth forecast by 100,000 barrels per day (bpd) for this year and next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018.

The IEA, meanwhile, delivered a surprisingly downbeat outlook for oil demand in its monthly market report, showing an expected slowdown in consumption that was at odds with a more bullish view from the producer group OPEC on Monday. But analysts expect the price to not rise much further in coming months as the USA ramps up production.

U.S. oil production has already increased by more than 14% since mid-2016 to 9.62 million bpd and is expected to grow further.

Oil rallied above $57 a barrel to a two-year high last week on escalating tensions in the Middle East and amid signals of a potential extension of supply curbs by the Organization of Petroleum Exporting Countries and allies.

Meanwhile, the the Organization of Petroleum Exporting Countries has yet to show it has convinced Russian Federation, one of its partners in the deal, that a decision to prolong output cuts is needed when the group meets in Vienna this month.

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