Crude oil futures edged down in European morning trading Wednesday in the wake of the International Energy Agency trimming its estimate for global oil demand growth in 2018.
At 1005 GMT, ICE July Brent crude futures were trading at $77.97/b, down 46 cents from Tuesday’s settle, while NYMEX June WTI crude futures were 21 cents lower at $71.10/b.
In its monthly oil market report, released Wednesday morning, the IEA lowered its estimate for growth in world oil demand this year to 1.4 million b/d from 1.5 million b/d due to higher oil prices.
« At the same time, non-OPEC supply is growing more strongly than previously anticipated, thereby reducing the call on OPEC to 32.25 million barrels per day (previously estimated at 32.5 million barrels per day). Thus the market is less tight than hitherto assumed, » said Commerzbank analysts in a morning note.
A downward movement in the demand estimate, combined with the American Petroleum Institute reporting Tuesday a 4.85 million barrel weekly increase in US crude oil inventories, when the market was expecting a drawdown, has brought a bearish sentiment to the market despite concerns over supply from Iran and Venezuela.
The US Energy Information Administration publishes its more closely watched weekly numbers later today.
The IEA warned Wednesday a potential supply shortfall from Iran and Venezuela could present a « major challenge » for oil producers if they are to fend off sharp price rises and fill the gap, and reiterated its readiness to act if necessary to ensure a well-supplied market.
With Iran facing export barriers following the US decision to pull out of the landmark 2015 nuclear deal, and Venezuela’s output potentially falling by several hundred thousand barrels a day more this year, « the potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality, » the report said.