Crude Oil Falls to Two-Month Low on Oil Stockpiles

Total oil inventories in developed nations increased by 13.8 million barrels to about 3 billion in September, a month when they typically decline, according to the agency.

“Instead, traders took a “glass half full” approach to the IEA’s report, focusing on oil demand growing at its fastest pace in five years and the prediction of slower non-OPEC output in 2016″. Production has declined in recent months, but not as quickly as a few expected.

In Thursday trading before the report, the benchmark USA oil price touched a low of $41.74 per barrel, among its lowest prices since August 26 when it settled at $38.60.

Despite the dark cloud hovering over the industry now, some anticipate a rebalancing in supply and demand in the next few years. “The net result is brimming crude oil stocks that offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions”.

“Saudi Arabia shows no sign of reversing its year-old policy to defend market share rather than price”, in the run-up to OPEC’s next meeting on December 4, the IEA observed, despite the kingdom paying for low oil prices with a ballooning budget deficit.

Global oil demand growth has not been fast enough to soak up the excess in supplies and analysts say a rebalancing of the supply-demand situation is needed for a sustained uptick in prices.

The IEA did not see the situation changing anytime soon. Economic conditions are expected to remain problematic in countries such as China, and factors that have recently fuelled consumption are expected to fade, it said.

ANZ also said that big price rebound this year was unlikely: “A year end recovery in commodity prices remains unlikely with a stronger US$ and EM (emerging market) growth concerns”.

The Organization of Petroleum Exporting Countries (OPEC) points out that the surplus in global inventories has reached the highest level in the last 10 years. “The oversupply is also causing levels to rise outside the U.S”.

The API’s results – which often correlate closely with the EIA’s official figures out a day later – forecast that oil stockpiles in the United States rose by 6.3 million barrels in the week ended November 6th, well above the 1.1 million barrel increase that analysts polled by news agency the Wall Street Journal projected.

OPEC kept unchanged its 2015 and 2016 forecasts for global oil demand, production outside the group, and the amount OPEC will need to pump.