Oil prices fall as oversupply concerns overshadow US government reopening
FILE PHOTO: A view shows oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
HOUSTON :Oil prices fell more than $2 on Wednesday, weighed down by an OPEC report saying global oil supply will match demand in 2026, marking a further shift from its earlier projections of a supply deficit.
Brent crude futures fell $2.15, or 3.3 per cent, to $63.01 a barrel by 10:11 a.m. CST (1611 GMT) after gaining 1.7 per cent on Tuesday. U.S. West Texas Intermediate crude was down $2.07, or 3.39 per cent, at $58.97 a barrel, after climbing 1.5 per cent in the previous session.
The Organization of the Petroleum Exporting Countries noted that world oil supply would match demand next year due to the wider OPEC+ group's production increases - a shift from its earlier projections of a supply deficit in 2026.
"The prospect that the market is in balance is definitely what drove down prices," said Phil Flynn, senior analyst with Price Futures Group. "I think the market wants to believe it's balanced. I think the market took OPEC more seriously than IEA."
The International Energy Agency, meanwhile, forecast in its annual World Energy Outlook on Wednesday that oil and gas demand could continue to grow until 2050.
The projection was a departure from the IEA's previous expectation that global oil demand would peak this decade, as the international body moved away from a forecasting method based on climate pledges back to one that takes into account only existing policies.
"Due to a modest downward revision of oil demand and higher non-OPEC+ supply in 3Q, the OPEC secretariat now also predicts a surplus for 3Q. That said, it is still much smaller compared to EIA and IEA," said UBS analyst Giovanni Staunovo.
Analysts have previously highlighted that crude oversupply is curbing price gains. OPEC+ agreed this month to a pause in increasing its output in the first quarter of next year, after having unwound its cuts to production since August this year.
US GOVERNMENT REOPENING
The reopening of the U.S. government, however, could boost consumer confidence and economic activity, spurring demand for crude oil, IG Market analyst Tony Sycamore wrote in a note.
The U.S. Republican-controlled House of Representatives is set to vote later on Wednesday on a bill, already signed off by the Senate, that would restore funding to government agencies through January 30.
The U.S. Energy Information Administration will release its outlook on Thursday.
