Stocks skid as weaker forecast sends oil prices lower

Oil prices continued to plummet on Wednesday, at times as much as 2%, after data showed large weekly builds in US petroleum products offset a surprise draw in crude stockpiles.

USA crude inventories dropped by 559,000 barrels in the week to September 9, defying analysts expectations of a crude build of 3.8-million barrels.

In the week ending on September 9, the EIA reports that Gasoline inventories were 600,000 barrels higher, after previously reporting a 4.2 million barrel slump in the week before, as it remains above the usual levels for this time of the year.

The International Energy Agency (IEA), which advises oil-consuming countries on their energy policies, said a sharp slowdown in oil demand growth, coupled with ballooning inventories and rising supply, means the market will be oversupplied at least through the first half of 2017. They also reported that U.S.’ shale drillers proved to be more flexible despite low prices. An increase in exports by these two countries would be a major oil-market development ahead of talks in Algeria at the end of this month among OPEC members to cap output. West Texas Intermediate, the US benchmark price for oil, was up 0.7 percent to open in NY at $43.87 per barrel.

U.S. West Texas Intermediate futures CLc1 were up 29 cents, or 0.7 percent, at $45.19 a barrel.

Prices had fallen sharply a day earlier after a report from the International Energy Agency suggested that the global glut could last longer than expected.

He noted that low oil prices could help to put the brakes on production.

“The process of shaving an additional $4.50 a barrel off of the crude benchmarks could require another couple of weeks”, said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates. The cartel forecast that output from outside the group would only contract by 610,000 barrels a day – following an upward revision of 180,000 barrels a day from August, to average 56.32 million barrels a day.

“More heartbreak in the oil market overnight for bulls”, said Jeffrey Halley, senior market analyst with OANDA trading.

Brent North Sea crude for November delivery won 16 cents to $47.26 a barrel compared with the previous day’s close. Also, US crude oil production also saw a massive surge as it climbed to 8.5 million barrels a day a week ago, as estimated by EIA. The question is when supply and demand will return to balance.