Oil slipped as the International Energy Agency became the latest group to forecast a sharp increase in US production.
Futures in New York tumbled as much as 1.7 per cent before paring losses, as they head for the first weekly decline since mid-December. The Paris-based IEA said it sees “explosive” growth in US oil supply this year after an “exceptionally tight” period for crude markets at the end of 2017. Opec and the Energy Information Administration also recently boosted their outlooks for American production.
Oil’s rally has faltered after two annual increases on speculation that the surge in prices may have been overdone. Banks including Citigroup Inc. predict the deal between the Organisation of Petroleum Exporting Countries and its allies will begin winding down from the middle of the year as they achieve their aim of reducing a global surplus. Still, ministers from the United Arab Emirates, Iraq and Kuwait have insisted there’s no need to change tack.
The IEA’s report is “adding to the current theme of non-Opec growth at these levels,” says Ole Hansen, head of commodity strategy at Saxo Bank A/S. “It’s another reason to be cautious about getting too carried away with oil.”
West Texas Intermediate for February delivery fell 50 cents to $63.45 a barrel on the New York Mercantile Exchange as of 12:29pm in London. Total volume traded was about 30 per cent higher than the 100-day average. Prices are down 1.3 per cent this week.
Brent for March settlement dropped 59 cents to $68.72 a barrel on the London-based ICE Futures Europe exchange. Prices are down 1.7 per cent this week and are set for the first weekly drop this year. The global benchmark crude traded at a premium of $5.32 to March WTI.
The IEA raised its forecast for US oil production growth this year by 240,000 barrels a day to 1.35 million barrels, putting it on track to surpass Saudi Arabia and rival Russia. US output rose by 258,000 barrels a day last week to 9.75 million, the Energy Information Administration said Thursday.