MARKET WATCH: Crude prices fall slightly on IEA demand outlook

Light, sweet crude oil futures traded mixed Nov. 13 but held fairly flat on the New York market while Brent crude oil prices fell modestly in London yet still settled above $63/bbl.

Light, sweet crude oil futures traded mixed Nov. 13 but held fairly flat on the New York market while Brent crude oil prices fell modestly in London yet still settled above $63/bbl.

Oil futures edged lower Nov. 14 after the International Energy Agency cut its crude demand growth outlook for 2017-18.

In a monthly Oil Market Report the IEA said world oil demand growth will be slower than previously expected. Rising oil prices were blamed for the slowing rate of demand growth.

IEA expects demand will rise by 1.5 million b/d this year and by 1.3 million b/d next year. The growth forecast is down about 100,000 b/d from earlier forecasts.

In contrast, the Organization of Petroleum Exporting Countries raised its forecasts for world oil demand growth for the same periods.

The cartel’s latest Monthly Oil Market Report expects oil demand will rise 1.53 million b/d in 2017 and 1.51 million b/d in 2018.

Although market forecasts can vary between OPEC and IEA, some analysts said the latest discrepancy was unusually large.

“It will create some volatility as the market is going to be split between those that think the IEA is too much on the bearish side,” said Olivier Jakob, Petromatrix managing director.

“You cannot have the same forecast at $60[/bbl] as you have at $40[/bbl],” Jakob said of oil prices. “You need to address that, and the IEA is starting to make that adjustment.”

IEA said global oil supply rose during October by 100,000 b/d to 97.5 million b/d driven by non-OPEC production in the North Sea and Mexico.

But IEA said OPEC output fell 80,000 b/d in October to 32.53 million b/d with lower production in Iraq, Algeria, and Nigeria.

IEA’s OPEC production statistics compared with OPEC’s own estimate of 32.59 million b/d.

Fitch Ratings issued its 2018 oil outlook, saying the credit-rating agency assumes 2018 “average oil prices will be broadly unchanged year-on-year and that the recent price recovery with Brent exceeding $60/bbl may not be sustained.”

Brent has averaged $54.50/bbl for the year so far.

Commercial petroleum stocks in the Organization for Economic Cooperation and Development fell below 3 billion bbl in September, marking its first such dip in 2 years, IEA said.

Energy prices

The December light, sweet crude contract on the New York Mercantile Exchange gained 2¢ on Nov. 13 to $56.76/bbl. The January 2018 contract edged down 1¢ to $56.97/bbl.

The NYMEX natural gas price for December fell 4¢ to a rounded $3.17/MMbtu. The Henry Hub cash gas price was $3.12/MMbtu, down 2¢.

Heating oil for December fell less than 1¢ to a rounded $1.93/gal. The NYMEX reformulated gasoline bloodstock for December dropped a rounded 3¢ to $1.79/gal.

The Brent crude contract for January 2018 on London’s ICE decreased 36¢ to $63.16/bbl. The February 2018 contract fell 31¢ to $63.10/bbl. The gas oil contract for December was down $3.75 to $565.25/tonne.

OPEC’s basket of crudes on Nov. 13 was $61.27/bbl, down 31¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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