Oil slipped as the International Energy Agency (IEA) became the latest to warn of a jump in US production.
Futures tumbled as much as 1.7 per cent in New York and are poised for the first weekly decline since mid-December. The IEA said it sees “explosive” growth in US oil supply this year. Opec and the Energy Information Administration (EIA) also recently boosted their outlooks for American production.
Oil’s rally has faltered after two annual increases on speculation the surge in prices may have been overdone. Banks including Citigroup predict the deal between the Organisation of Petroleum Exporting Countries and its allies will be wound down from the middle of the year as their aim of reducing a global surplus is achieved. 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. “It’s another reason to be cautious about getting too carried away with oil.”
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West Texas Intermediate for February delivery fell 35 cents to US$63.60 abarrel on the New York Mercantile Exchange as of 10:50 am. in London. Total volume traded was about 44 per cent higher than the 100-day average. Prices are down 1.1 per cent this week.
Brent for March settlement dropped 39 US cents to US$68.92 a barrel on the London-based ICE Futures Europe exchange. Prices are down 1.4 per cent this week, set for the first weekly drop this year. The global benchmark crude traded at a premium of $5.38 to March WTI.
The IEA raised its forecast for US oil production growth this year by 240,000 barrels per day (bpd) to 1.35 million barrels, putting it on track to surpass Saudi Arabia and rival Russia. The country’s output rose by 258,000 bpd last week to 9.75 million, the EIA said Thursday.