EIA cuts 2016 oil price forecast as crude trades below 6-year low

The EIA now forecasts the Brent crude price to average $59.42 a barrel in 2016, down $7.62 a barrel from the June estimate.

Barnabas Gan, an economist with OCBC Bank, said investors will also be closely monitoring weekly U.S. crude oil inventory data to be issued late Wednesday as any slippage may support prices. For the full year, the EIA expects an average price of $2.43 a gallon, a nickel a gallon below last month’s estimate. The agency lowered its forecast for 2016 to 8.96 million barrels per day from an earlier 9.32 million barrels a day.

Inventories of crude oil and equivalent products edged down 1.6 per cent compared with May of 2014.

“While US crude oil production this year is expected to be 100,000 barrels per day less than previously forecast, oil output is still on track to be the highest since 1972″, EIA Administrator Adam Sieminski said in a statement.

“Petroleum markets have come under renewed selling pressure as China’s move to devalue the yuan was seen as a threat to crude oil import levels and OPEC’s Monthly Oil Market Report pointed to an ongoing global surplus”, said Tim Evans, an analyst at Citi Futures, in a note to clients.

The production cut estimate is the most noteworthy headline. Iraq too sent production higher, up to near 4 million barrels per day from 3.33 million per day in the second quarter of a year ago. Production is expected to decline in the first half of next year before increasing again.

Owing to the lowered number of oil rigs in the US, the Energy Information Administration trimmed its U.S. crude production forecast for the present and the next year.

“Global liquids production continues to outpace consumption”, the EIA said in its report.