Oil tumbles 3 percent after both IEA, OPEC see glut persisting

Tue Sep 13, 2016 4:59pm EDT
 
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices fell as much as 3 percent on Tuesday after both the world's energy watchdog and OPEC revised forecasts that signaled the global crude glut could persist for much longer than expected.

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. [IEA/M]

The IEA's comments follow a surprisingly bearish outlook from the Organization of the Petroleum Exporting Countries on Monday that also pointed to a larger surplus next year due to new fields in non-member countries. U.S. shale drillers are also proving more resilient than expected to cheap crude, OPEC said. [OPEC/M]

"It seems the situation has deteriorated strongly in the eyes of OPEC, as well as the IEA," said Commerzbank head of commodities strategy Eugen Weinberg.

"I wouldn't be surprised to see this price weakness continue for a while, because that was not on the cards, in our opinion."

A stronger dollar .DXY also weighed on crude and other commodities denominated in the U.S. unit, making them less affordable to holders of currencies such as the euro. U.S. equity markets .SPX were down nearly 2 percent, extending the bearish sentiment across risky markets. [FRX/] [.N]

Brent crude LCOc1 settled down $1.22 or 2.5 percent, at $47.10 a barrel.

U.S. West Texas Intermediate crude CLc1 fell $1.39, or 3 percent, to settle at $44.90.   Continued...

 
A pump jack is seen at sunrise near Bakersfield, California October 14, 2014.  REUTERS/Lucy Nicholson/File Photo