High energy prices threaten economic damage, but likely to continue: IEA

15 October, 2018, 08:13 | Author: Frank Williams
  • Oil prices: IEA, OPEC weigh in with forecasts

In U.S. oil markets, a decline in commercial crude inventories provided WTI with stronger support than Brent.

The Organization of the Petroleum Exporting Countries (OPEC) cut its forecast of global demand growth for oil next year for a third straight month, citing headwinds facing the broader economy from trade disputes and volatile emerging markets.

West Texas Intermediate Crude was trading up 0.31 per cent at $71.19, down more than $3 per barrel from last Friday. WTI is on track for a 3.5 percent decline this week.

'This is due to a weaker economic outlook, trade concerns, higher oil prices and a revision to Chinese data, ' said the IEA, which advises industrialised countries on energy policy. Canada's main benchmark crude index, Western Canada Select (WCS) is now trading at $26.2 per barrel, which is nearly $55 barrel per barrel discount to Brent and $45 per barrel discount to WTI. A drop in equities amid wider risk-off investor sentiment had pressured crude on Thursday.

Figures released Thursday by the U.S. Energy Information Administration revealed crude inventories climbed by six million barrels in the week leading up to October 5, compared with analyst expectations for an increase of 2.6 million barrels.

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OPEC, Russia and others such as USA shale companies had increased production sharply since May, the IEA said, raising global output by 1.4 million barrels per day (bpd).

Iranian oil exports in September fell to 1.63 million bpd, down 800,000 bpd from recent 2Q18 peaks, the agency estimated.

Both OPEC and the IEA have reported that the oil market is well supplied, with the latter even lowering its global oil demand growth estimate for 2018 and 2019 by about 110 000 bpd to 1.3 mbpd and 1.4 mbpd respectively.

"Oil bulls are bearing the brunt of another bruising session as yesterday's selling frenzy intensifies", said Stephen Brennock, analyst at London brokerage PVM Oil. The Bloomberg Commodity Index had its first back-to-back drop in three weeks on Thursday as oil and aluminum prices plunged, and is on course for the first weekly drop in four weeks.

Michael crashed ashore Florida on Wednesday as the third most powerful hurricane to strike the US mainland, leaving seven people least.

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