Oil tanks as gloomy outlook from IEA undermines Opec optimism

West Texas Intermediate Crude Oil

US crude and gasoline stocks increased while distillate inventories fell, the Energy Information Administration said on Wednesday.

U.S. West Texas Intermediate (WTI) crude was at $55.10 per barrel, down 60 cents, or over 1 percent.

Crude prices came under pressure after the EIA revealed a somewhat downbeat outlook for oil demand in its monthly report, forecasting weakness in global demand growth, while warning that global oil markets will be oversupplied through the second quarter of 2018.

The price falls mean that crude prices are now down by about 5% since hitting 2015 highs last week, ending a 40% rally between June and early November.

However, this is expected to cut only 2.5 million barrels per day (bpd), or about 2 percent, off global oil demand by that time.

In 2025, global oil demand is expected to increase by 7 percent and reach 100.3 million barrels per day, which is 2.1 barrels more than forecast previous year.

"Using a scenario whereby current levels of OPEC production are maintained, the oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 600,000 bpd followed by another, smaller, surplus of 200,000 bpd in 2Q18", the agency said.

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Global oil supply rose by 100,000 bpd in October to 97.5m bpd on higher production from non-Opec countries, and non-Opec oil supply is expected to rise by 700,000 bpd this year and 1.4m bpd next year, led by stronger output in the US. But analysts expect the price to not rise much further in coming months as the USA ramps up production.

Crude has climbed lately to a two-year high around $57 United States a barrel in trading in NY, although it is not seen making much larger gains due to rising USA output.

Meanwhile, Russia believes it's too early to announce a possible extension to output cuts at the group's producer meeting, according to two people with knowledge of the matter.

Greg McKenna of futures brokerage AxiTrader said prices were dragged down as "current demand will fall and longer term the growth of USA oil production will eclipse anything we've seen before - including the Saudis and Russians".

Crude stockpiles climbed to about 459 million barrels last week and production extended gains to 9.65 million barrels a day, according to the EIA.

From a shift in the geopolitical center of the global energy market to the predicted trajectory of individual technologies, here's your need-to-know guide to this bumper report.

The IEA said non-Opec production would add 1.4-million barrels a day of additional production in 2018.

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