Oil prices down over 2 per cent
Oil prices fell over 2 per cent on Tuesday on concerns of rising US crude output and a report from the International Energy Agency showing a less optimistic outlook for global crude growth.
As well, oil prices were caught up in a global commodities sell off, led by base metals including nickel and copper, on economic data from China that was weaker than expected.
By 1:04 p.m. EST, benchmark Brent had dropped by $1.22 to $61.94/barrel and US WTI had fallen $1.20 to $55.56/barrel. The Canadian Crude Index fell to $40.42.
The IEA monthly market report showed a downbeat outlook for crude demand. The agency expects a slowdown in consumption that contradicts OPEC’s more bullish view.
In its report, the IEA cut its demand growth forecast for 2017 by 100,000 barrels per day (b/d) to an estimated 1.5 million b/d. By 2018, the agency predicts the growth for crude demand will be 1.3 million b/d.
According to the IEA, warmer temperatures will cut demand for crude at a time when rising output from some producers, including the United States, could revive the global crude glut in the first half of 2018.
“The IEA slashing its oil demand growth forecast for this year and the next has dampened some of the bullish sentiment prevailing in the market,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics told Reuters.
US crude output, according to the US Energy Information Administration, has risen by over 14 per cent since mid-2016 to a record high of 9.62 million b/d.
The EIA said US shale production is expected to rise for a 12th straight month in December, increasing by 80,000 b/d.
“The recent price support, namely the tension in the Middle East, has been swept aside as rising rig counts and U.S. shale output (are) in the focus of traders,” PVM Oil Associates analyst Tamas Varga told Reuters.
Most traders did offer cautious hope that oil prices were not expected to fall much, mostly because of OPEC’s supply cut agreement.
