Wednesday has witnessed price cut in oil as prices fell more than 1 percent. This has come after the International Energy Agency cast doubts over the past few months’ narrative of tightening fuel markets.
The numbers are, Brent crude futures were at $61.33 per barrel at 0515 GMT, down 88 cents, or 1.4 percent from their last close. While U.S. West Texas Intermediate (WTI) crude was at $55 per barrel, down 70 cents, or 1.3 percent.
This price cut has resulted in a form that crude prices are now down by around 5 percent since hitting 2015 highs last week, ending a 40-percent rally between June and early November.
Sukrit Vijayakar, director of energy consultancy Trifecta reacted, “Crude prices dropped dramatically after the IEA forecast a gloomy outlook for the near future … The drop was arguably exacerbated by a global sell off in other commodities.”
On Tuesday, the International Energy Agency (IEA) cut its oil demand growth forecast by 100,000 barrels per day (bpd) for this year and next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018.
In a statement, the agency said that, “The oil market faces a difficult challenge in 1Q18 with supply expected to exceed demand by 600,000 bpd followed by another, smaller, surplus of 200,000 bpd in 2Q18.”
The demand slowdown predicts that world oil consumption may not, as many expect, breach 100 million bpd next year, while supplies are likely to exceed that level.
The American Petroleum Institute (API) stated on Tuesday that U.S. crude inventories rose by 6.5 million barrels in the week to Nov. 10 to 461.8 million.