Oil Rebounds Towards $81 but Weaker Demand View Weighs

Oil Rebounds Towards $81 but Weaker Demand View Weighs”

Following a big production increase in the last six months, the oil markets appear to be "adequately supplied for now", but the industry is coming under strain, according to an article in Reuters citing The International Energy Agency.

November West Texas Intermediate crude CLX8, +0.76% rose 37 cents, or 0.5%, to settle at $71.34 a barrel on the New York Mercantile Exchange. Canada's main benchmark crude index, Western Canada Select (WCS) is now trading at $26.2 per barrel, which is nearly $55 barrel per barrel discount to Brent and $45 per barrel discount to WTI.

On the oil front, US crude inventories rose by 6 million barrels last week, the Energy Information Administration said, more than double analysts' expectations of a 2.6 million-barrel increase.

Oil has registered its biggest weekly loss since May as turmoil in equity trading spilled over into the crude market, said a report.

The International Energy Agency said in its monthly report that the world's spare oil production capacity was down to 2 percent of global demand, with further falls likely.

"Expensive energy is back, with oil, gas and coal trading at multi-year highs, and it poses a threat to economic growth", particularly for emerging economies, it warned. USA crude futures rose 37 cents to US$71.34 a barrel.

"We still estimate oil demand growing at 1.2 million to 1.5 million barrels per day for this year, and see the risk of a slowdown in 2019 if trade tension escalates", ANZ Research analysts said in a report.

The IEA welcomes this boost to supply. New data for OECD stocks show that in August they increased by a more- than-normal 16 mb and have been relatively stable for several months after falling significantly following the implementation of the original Vienna Agreement. Both global demand and supply are close to hitting 100 million barrels a day for the first time.

A drop in United States oil production this week supported prices. “It has become clear that recent price gains are being driven by lower inventories heading into the peak demand winter season and not by the short-term storm shut-ins” in the Gulf of Mexico due to Hurricane Michael, said Colin Cieszynski, chief market strategist at SIA Wealth Management.

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