Crude Oil Prices Fall as IEA Report Hints Glut to Continue

Talking Points:

• Crude oil prices fell after IEA report argued supply glut will continue
• Global supply fell to 0.3 mb/d in August despite record OPEC output
• IEA expects non-OPEC output will rise while demand slows next year

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Crude oil prices fell 2.7 percent today following the release of the International Energy Agency’s monthly market report. The IEA downgraded their 2016 demand outlook, forecasting a gain of 1.3 mb/d versus 1.4 mb/d previously, noting that uptake is slowing at a “faster pace than initially predicted”. The agency cited a “more pronounced slowdown” in the third quarter of 2016 as driver of a further demand decrease.

Global oil supply decreased by 0.3 mb/d in August even as OPEC production increased again. OPEC’s near-record output continues to counter-balance sharp declines among non-member producers. The IEA expects non-OPEC supply will return to growth in 2017, following an 840 kb/d decrease this year. Total inventories increased to a record 3111mb in July but saw a sharp decline in August following the largest supply draw from the US in 15 years, which was broadly attributed to weather conditions.