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Oil halts rally as IEA warns US production surge looming

Jan 19 2018 13:06
Alex Longley and Ben Sharples, Bloomberg

London - 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% 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 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.”

West Texas Intermediate for February delivery fell 35 cents to $63.60 a barrel on the New York Mercantile Exchange as of 11:50. Total volume traded was about 44% higher than the 100-day average. Prices are down 1.1% this week.

Brent for March settlement dropped 39c to $68.92 a barrel on the London-based ICE Futures Europe exchange. Prices are down 1.4% 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 a day to 1.35 million barrels, putting it on track to surpass Saudi Arabia and rival Russia. The country’s output rose by 258 000 barrels a day last week to 9.75 million, the Energy Information Administration said on Thursday. 

Oil-market news:

• US drillers may boost spending and oil production after the recent gain in prices, leading to an overcorrection, Conoco Phillips CEO Ryan Lance said in an interview in Houston on Thursday.

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commodities  |  markets  |  oil
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