Oil up but IEA supply glut warning limits gains
Singapore : Oil edged higher in Asia today but hopes for a sustained rebound were dashed by fresh warnings a global supply glut would persist longer than expected.
As the market eyed a producers’ meeting later this month for some reprieve, the International Energy Agency (IEA) said Tuesday that growth in oil demand was slowing while supply was rising.
The Paris-based organisation warned the glut would linger “at least through the first half of next year”, reversing its earlier projection the oversupply would be soaked up in the latter part of 2016.
At around 0315 GMT, US benchmark West Texas Intermediate for delivery in October was up 21 cents to USD 45.11 and Brent crude for November added 18 cents to USD 47.28 a barrel.
IEA’s forecast followed a report on Monday by the Organisation of the Petroleum Exporting Countries which predicted that non-member countries would see output rise in 2017, revising its previous expectations of a drop.
“Another nail in the coffin overnight, as both OPEC and the International Energy Agency revised their oil demand figures for 2017 down,” said Jeffrey Halley, senior market analyst at OANDA trading.
“Long-suffering oil bulls will now turn nervously to the US EIA’s commercial crude inventory numbers to be released this evening in New York,” he said.
The US Energy Information Administration will release later Wednesday data on US commercial crude inventories in the week to September 9, a closely watched measure of demand in the world’s top oil consumer.
US stockpiles fell the most in 17 years the previous week, surprising the market, although analysts said the decline was because of the suspension of imports and shutdown of some production owing to a severe hurricane in the Gulf of Mexico and not due to robust demand.
Traders will be watching for any deals to freeze or cut output when OPEC and non-OPEC producers meet in Algeria later this month.
“There are still major doubts about whether a deal can be done,” IG Markets said in an analysis.
“The world’s largest producer, Saudi Arabia, is lukewarm about a freeze, while Iran and Iraq are still increasing output following wars and sanctions and they’re unlikely to support a deal until they’re pumping at full capacity.”