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Oil consumption will rise by about 650,000 barrels a day this year, 250,000 fewer than the prior estimate, International Energy Agency (IEA) said in its monthly market report. Photo: Bloomberg
Oil consumption will rise by about 650,000 barrels a day this year, 250,000 fewer than the prior estimate, International Energy Agency (IEA) said in its monthly market report. Photo: Bloomberg

Brent crude oil falls to lowest since 2010 after IEA cuts demand forecast

Brent for Nov settlement declined $1.36 to $87.53 a barrel. It slipped to $87.09, the lowest intraday price since 1 Dec, 2010

New York: Brent crude oil fell to the lowest level in almost four years after the International Energy Agency (IEA) said oil demand will expand this year at the slowest pace since 2009. West Texas Intermediate (WTI) slipped for the fifth time in six days.

Futures dropped as much as 2% in London and 1.5% in New York. Oil consumption will rise by about 650,000 barrels a day this year, 250,000 fewer than the prior estimate, the Paris-based agency said in its monthly market report. US crude supplies probably grew by 2.5 million barrels last week, according to a Bloomberg survey of analysts before a report from the Energy Information Administration (EIA) on 16 October.

Oil futures have collapsed into bear markets as shale supplies boost US output to the most in almost 30 years and global demand weakens. The biggest producers in the Organization of Petroleum Exporting Countries (Opec) are responding by cutting prices, sparking speculation that they will compete for market share rather than trim output. Saudi Arabia won’t alter its supplies much between now and the end of the year, a person familiar with its oil policy said on 3 October.

“The IEA report is killing Brent," Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “This is the fourth month in a row where they’ve cut their demand forecast. There’s tremendous downside risk for the market."

Fourth Month

Brent for November settlement declined $1.36, or 1.5%, to $87.53 a barrel on the London-based ICE Futures Europe exchange at 9:16 am in New York. It slipped to $87.09, the lowest intraday price since 1 December, 2010. The volume of all futures traded was 50% above the 100-day average for the time of day. Prices have decreased 21% this year.

WTI for November delivery dropped 55 cents, or 0.6%, to $85.19 a barrel on the New York Mercantile Exchange. The contract settled at $85.74 on Monday, the lowest close since December 2012. Volume was 40% higher than the 100-day average. The US benchmark grade traded at a $2.34 discount to Brent, down from $3.15 at Monday’s close.

The IEA reduced its estimate for demand growth this year for the fourth month in a row, meaning oil consumption will expand by about half the rate of 1.3 million barrels a day anticipated in June. About 200,000 barrels a day less crude will be needed from Opec this year and next than estimated previously, the agency said.

Market Share

Opec, which supplies about 40% of the world’s crude, is raising output as its members compete for market share while seeking to meet increased domestic demand. The group pumped 30.935 million barrels a day in September, the most since August 2013, according to a Bloomberg survey.

Iraq said on 12 October that it will sell its Basrah Light crude to Asia at the biggest discount since January 2009, following cuts by Saudi Arabia and Iran. Middle East producers almost always follow the lead of Saudi Arabia, Opec’s largest member when setting export prices. The Saudis need to deepen price cuts for Asia by between 70 cents and $1 a barrel to restore a competitive position against other Middle Eastern and West African suppliers, according to JPMorgan Chase & Co.

Oil ministers from Kuwait and Algeria have dismissed possible output cuts as the price slump prompted Venezuela to call for an emergency Opec meeting. The group is scheduled to gather on 27 November in Vienna. Bloomberg

Rupert Rowling in London also contributed to this story.

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