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Oil Slides Near $48 as IEA Cuts Demand Estimates for OPEC Crude

August 11, 2017

(Bloomberg) Oil headed for a second weekly loss after the International Energy Agency reduced demand estimates for OPEC crude and said the group’s commitment to drain a global glut is fading.

Futures declined 0.3 percent in New York. Neither a pledge by the two biggest Organization of Petroleum Exporting Countries producers to strengthen their commitment to output curbs nor shrinking U.S. crude stockpiles is managing to lift prices. The IEA reduced estimates for the amount of crude needed from OPEC this year and next by 400,000 barrels a day after revising historical data on emerging-market consumption.

While U.S. crude inventories dropped to the lowest since October, gasoline stockpiles last week expanded for the first time since early June, indicating that consumption may be waning as the summer driving season draws to a close. OPEC’s rate of compliance with production cuts slipped last month to 75 percent, the lowest since the accord started in January, the IEA said Friday in its monthly report. OPEC said Thursday its output is increasing on supplies from Libya, which is exempt from the deal.

IEA Drives OPEC from Quiet Confidence to Panic Stations: Gadfly

“Concerns about the persisting supply glut resurfaced after petro-nations reported growing oil output,” said Norbert Ruecker, head of commodities research at Julius Baer Group Ltd. in Zurich. “We maintain a neutral view and see oil prices trading sideways as growing shale output and stagnant western-world oil demand undermine the Middle East’s supply deal.”

West Texas Intermediate for September delivery lost 14 cents to $48.45 a barrel on the New York Mercantile Exchange at 8:51 a.m. local time. Total volume traded was about 19 percent above the 100-day average. Prices are down 2.2 percent this week.

Brent for October settlement fell 11 cents to $51.79 a barrel on the London-based ICE Futures Europe exchange. Prices on Thursday dropped 80 cents, or 1.5 percent, to $51.90. The global benchmark is down 1.2 percent this week and traded at a premium of $3.23 to October WTI.

Oil-market news:

Saudi Arabia’s Energy Minister Khalid Al-Falih and his Iraqi counterpart Jabbar al-Luaibi met in Jeddah and agreed to ensure coordination of their policies, according to a report from the Saudi Press Agency. Al-Falih said deeper output cuts must be collective and agreed to by all 24 countries participating in an agreement to curb production, newspaper Asharq al-Awsat reports, citing comments at a press conference with Iraq’s oil minister. OPEC increased its forecasts for the amount of crude it needs to supply in 2017 and 2018 by about 200,000 barrels a day for each year, according to a monthly report Thursday from its secretariat in Vienna. Citgo Petroleum Corp., the largest U.S. importer of Venezuelan oil and a unit of state-owned Petroleos de Venezuela SA, has started to make quiet inquiries to buy Canadian crude for its refineries in Texas and Louisiana, according to people familiar with the situation. The imports would be used to replace dwindling shipments from Venezuela, where output dropped to a 14-year low in July.

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