Oil price slips on IEA report, U.S. stocks forecast
London (Oct 13) Oil prices slipped on Tuesday after the International Energy Agency (IEA) forecast a global supply glut would last through 2016 as demand growth slows and key OPEC producers maintain near-record output.
The Paris-based IEA said the world oil market would remain oversupplied for at least another year.
"A projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels – should international sanctions be eased – are likely to keep the market oversupplied through 2016," the agency said.
Oil prices dropped more than 5 percent on Monday on news of higher output by the Organization of the Petroleum Exporting Countries and on expectations of higher U.S. crude stockpiles.
Global benchmark Brent crude was down 20 cents a barrel at $49.66 by 0550 ET. U.S. crude was down 30 cents at $46.80 after settling down $2.53.
In its monthly report on Tuesday, the IEA said global oil demand would increase by 1.21 million barrels per day (bpd) in 2016, down 150,000 bpd from its forecast last month.
Global oil supply is outstripping demand as key Middle East producers raise output in an attempt to build market share.
OPEC increased supply in September by 90,000 bpd to 31.72 million bpd, the IEA estimated.
The agency said it expected OPEC crude oil output to remain around 31.5 million bpd in coming months as Saudi Arabia and Iraq focus on market share.
"We think that prices are likely to remain capped to the upside for the remainder of this quarter in line with our forecast due to weakening product demand, burgeoning crude and product stocks, and limited supply adjustments," Barclays said.
Going into 2016, ABN Amro said any removal of sanctions against Iran would keep oil lower than average prices in recent years, despite the likelihood of higher demand, a drop in U.S. production and an increased risk premium.
"We maintain our forecast for a moderate rise in oil prices, keeping it significantly below the 2011-2014 averages," said analyst Hans van Cleef.
A drop in oil prices because of abundant supply to close to half the level of a year ago has led to a downgrade in supply forecasts from countries outside OPEC such as the United States.
Investors awaited data on U.S. oil inventories due later on Tuesday and on Wednesday. A Reuters survey estimated that U.S. crude stockpiles had increased by 2.8 million barrels on average in the week ended Oct. 9.