October 12, 2017 by Ben Sharples and Grant Smith
Oil slid as investors waited to see if U.S. government data will confirm that crude stockpiles rose last week, and as the International Energy Agency warned of a ceiling for prices next year.
Futures lost 0.9 percent in New York after climbing 4.1 percent in the previous three sessions. Inventories rose by 3.1 million barrels last week, the American Petroleum Institute was said to report. Energy Information Administration data Thursday is forecast to show stockpiles dropped for a third week. Global supply and demand estimates for 2018 indicate that stockpiles may not fall further, potentially capping prices, according to the International Energy Agency.
Oil is up this week after the biggest weekly loss since May amid speculation output curbs led by members of the Organization of Petroleum Exporting Countries are gradually offsetting rising global production. Crude supply continues to exceed demand and markets are not re-balancing yet, according to IEA Executive Director Fatih Birol.
“According to the IEA’s calculation, at the current level of OPEC production there will be no global stock draws next year,” said Olivier Jakob, managing director of consultants Petromatrix GmbH in Zug, Switzerland. “If the IEA is right, then markets will continue to trade in the narrow” price band seen recently.
West Texas Intermediate for November delivery was at $50.82 a barrel on the New York Mercantile Exchange, down 48 cents, at 10:59 a.m. in London. Total volume traded was about 44 percent below the 100-day average. Prices gained 38 cents to $51.30 on Wednesday, the highest in more than a week.
Brent for December settlement declined 29 cents to $56.65 a barrel on the London-based ICE Futures Europe exchange. Prices added 33 cents, or 0.6 percent, to $56.94 on Wednesday. The global benchmark crude traded at a premium of $5.53 to December WTI.
Global oil stockpiles will fall this year by 300,000 barrels a day as stronger demand and output curbs by OPEC and Russia whittle away a surplus, the IEA said Thursday in its monthly report. Still, even if the producers decide to continue with the cuts next year, surging supplies from the U.S. and elsewhere will prevent inventories dropping further.
U.S. government data may show nationwide crude inventories declined by 2.4 million barrels last week, according to the median estimate in a Bloomberg survey before the EIA report. European refiners would be the biggest losers if Kurdish crude supplies are disrupted by the political fallout from the semi-autonomous region’s vote for independence from Iraq, the IEA said. OPEC will need to supply 33.1 million barrels a day next year, about 350,000 a day more than it pumped last month, the group said in its monthly report on Wednesday. U.S output will average 9.92 million barrels a day next year, the EIA said in its monthly Short-Term Energy Outlook on Wednesday. That’s up from a September estimate of 9.84 million barrels.