Oil falls after IEA report adds to outlook gloom
Oil fell on Tuesday following a series of gloomy predictions on demand growth that pointed to the global overhang of unused inventories persisting for much longer than anticipated, Reuters reported.
The International Energy Agency (IEA) said a sharp slowdown in global oil demand growth, coupled with ballooning inventories and rising supply, means the crude market will be oversupplied at least through the first six months of 2017.
That view marked a change from the agency's forecast a month ago when it saw supply and demand broadly in balance over the rest of this year and expected inventories to fall swiftly.
The IEA's latest comments follow a surprisingly bearish outlook from OPEC on Monday.
Brent crude prices LCOc1 was down 97 cents to $47.35 a barrel by 1105 GMT, while U.S. West Texas Intermediate futures CLc1 were down by $1.09 to $45.20 a barrel.
"It seems the situation has deteriorated strongly in the eyes of OPEC as well as the IEA," Commerzbank head of commodities strategy Eugen Weinberg said.
"I wouldn't be surprised to see this price weakness continue for a while right now, because that was not on the cards, in our opinion."
Upbeat Chinese data on industrial output growth for August failed to lift oil prices as the crude market remained in profit-taking mode, traders said.
China's industrial output grew the fastest in five months as demand for products from coal to cars rebounded thanks to higher government spending and a year-long credit and property boom.
Speculators in U.S. and Brent crude futures took an axe to their long positions in the latest week, cutting the combined net speculative length in the two contracts by 80 million barrels, according to PVM Oil Associates.
"Given the bearish fundamental backdrop, yesterday’s strength is not expected to be long-lived. Maybe this is what we are already seeing this morning with the two main crude oil futures contracts trading ... lower," PVM Oil Associates strategist Tamas Varga said in a note.
"As for today and tomorrow, all eyes will be on the weekly statistics on U.S. oil stocks to see whether last week’s huge fall in crude oil inventories was just a one-off."
U.S. crude inventory data is due on Tuesday and Wednesday.
A Reuters poll forecast that U.S. commercial crude oil stocks likely rose last week after marking the largest plunge since 1999 in the previous week.