Oil trades below $57 after IEA says OPEC may not see happy 2018

By Ben Sharples and Grant Smith on 12/14/2017

HONG KONG and LONDON (Bloomberg) -- Oil traded below $57/bbl as the International Energy Agency said OPEC-led production cuts aimed at clearing a global glut may falter next year.

Futures slipped 0.6% in New York after falling 2.4% the previous two sessions. While a glut in developed markets has shrunk, new supply from competitors including U.S. shale might grow faster than demand next year, thwarting efforts to drain what remains of a global surplus, the IEA said in its monthly report. American output last week rose to the highest in more than three decades, Energy Information Administration said Wednesday.

Oil is heading for a second yearly gain as the Organization of Petroleum Exporting Countries and its allies including Russia extend output cuts through the end of 2018. OPEC predicted global markets surplus inventories will be eliminated late next year after boosting forecasts for supplies from other rivals including the U.S., according to its monthly report on Wednesday.

“The oil market would be largely balanced” next year if the IEA’s forecasts prove correct, said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “Consequently, no further inventory reduction would be forthcoming.”

West Texas Intermediate for January delivery was at $56.29/bbl on the New York Mercantile Exchange, down 31 cents, at 12:56 p.m. in London. Total volume traded was about 17% below the 100-day average. Prices slid 54 cents to $56.60 on Wednesday to close at the lowest in a week.

Brent for February settlement fell 25 cents to $62.19/bbl on the London-based ICE Futures Europe exchange after falling 1.4% on Wednesday. The global benchmark crude traded at a premium of $5.87 to February WTI.

“On our current outlook, 2018 may not necessarily be a happy New Year for those who would like to see a tighter market,” the Paris-based IEA, which advises most major economies on energy policy, said in the report. “Total supply growth could exceed demand growth.”

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