Brent oil hits new four-year low as IEA cuts forecasts

LONDON: Brent oil prices sank to a new four-year low after the International Energy Agency slashed its forecasts for oil demand growth, blaming the weak economic outlook and abundant supplies.
The market had already hit multi-year lows in earlier Asian trade, with analysts citing concerns about a supply glut and the effects of weaker demand from Europe and China.
In morning London trade, Brent North Sea crude for delivery in November dived to $87.59 a barrel, touching the lowest level since December 1, 2010.
The contract later stood at $87.83 in midday deals, down $1.06 from Monday’s closing level.
US benchmark West Texas Intermediate (WTI) for November lost 96 cents to $84.78 per barrel.
“Crude oil (is) being sold again following the monthly report from the International Energy Agency in which they saw oil demand growth this year rising at the slowest pace since 2009,” said Saxo Bank analyst Ole Hansen.
He added: “At current production levels supply growth will outstrip demand growth and this is adding to the current negative sentiment in the market.”
For this year, the IEA expects demand to rise by just 700,000 barrels per day to 92.4 million barrels per day — which is 200,000 bpd less than the previous forecast.
This shrinking demand outlook in European and Asian members of the Organization for Economic Cooperation and Development matched average growth of 1.0 mbd in countries outside the OECD areas, according to the IEA.
For next year, the agency cut its estimate of global demand to 93.5 mbpd from 93.8 mbpd.
The Paris-based IEA, which is an energy watchdog for the world’s leading industrialized nations, updated its forecasts in its October market report.
Analysts said markets were becoming saturated with oil owing to a rise in US shale production and a return of Libyan crude into the market.
The Organization of the Petroleum Exporting Countries (OPEC) has meanwhile signalled that it has no intention of cutting output.
Kuwaiti Oil Minister Ali Al-Omair said on Sunday he expects falling prices to recover during the northern hemisphere winter — but OPEC was unlikely to counter the slide in the short term.
Energy research group Douglas-Westwood said investors will be watching an upcoming OPEC meeting in November.
“Will the group act in a disciplined manner and restrict output to support the benchmark price? Or will the members be driven purely by the desire to deliver as much volume to the market as possible?” it said in a note.