Oil Halts Rally as IEA Warns U.S. Production Surge Looming

Oil slipped as the International Energy Agency became the latest group to forecast a sharp increase in U.S. production.

Futures in New York tumbled as much as 1.7 percent before paring losses, as they head for the first weekly decline since mid-December. The Paris-based IEA said it sees “ explosive” growth in U.S. oil supply this year after an “exceptionally tight” period for crude markets at the end of 2017. OPEC and the Energy Information Administration also recently boosted their outlooks for American production.

Oil’s rally has faltered after two annual increases on speculation that the surge in prices may have been overdone. Banks including Citigroup Inc. predict the deal between the Organization of Petroleum Exporting Countries and its allies will begin winding down from the middle of the year as they achieve their aim of reducing a global surplus. Still, ministers from the United Arab Emirates, Iraq and Kuwait have insisted there’s no need to change tack.

The IEA’s report is “adding to the current theme of non-OPEC growth at these levels,” says Ole Hansen, head of commodity strategy at Saxo Bank A/S. “It’s another reason to be cautious about getting too carried away with oil.”

West Texas Intermediate for February delivery fell 65 cents to $63.30 a barrel on the New York Mercantile Exchange as of 8:07 a.m. in New York. Total volume traded was about 22 percent higher than the 100-day average. Prices are down 1.6 percent this week.

Brent for March settlement dropped 73 cents to $68.58 a barrel on the London-based ICE Futures Europe exchange. Prices are down 1.9 percent this week and are set for the first weekly drop this year. The global benchmark crude traded at a premium of $5.34 to March WTI.

The IEA raised its forecast for U.S. oil production growth this year by 240,000 barrels a day to 1.35 million barrels, putting it on track to surpass Saudi Arabia and rival Russia. U.S. output rose by 258,000 barrels a day last week to 9.75 million, the Energy Information Administration said Thursday.

Oil-market news:

Kazakhstan’s Kashagan field resumed output on Friday after a power disruption on Jan. 15, followed by a halt to an offshore power plant two days later. Oilfield-services companies are starting to see the gloom lifting after the worst crude collapse in a generation, according to Schlumberger Ltd.