OPEC forecast that demand for its oil in 2016 would be much higher than previously thought as its strategy of letting prices fall hits USA shale oil supplies.
USA crude edged up 19 cents, or 0.41 percent, to $46.85 a barrel after settling 0.93 percent, or 44 cents, lower at $46.66 a barrel.
In its latest market report, the IEA said it expects a “marked slowdown” in global oil demand growth next year, from an increase of 1.8 million barrels per day in 2015 to an increase of 1.2 million barrels per day in 2016.
OPEC crude supply rose by 90 kb/d in September to 31.72 mb/d as record Iraqi output more than offset a dip in Saudi supply.
A drop in oil prices due to oversupply has led to a downgrade in supply forecasts from the U.S. which is outside OPEC. USA oil explorers idled rigs for a sixth week as they struggle with low prices, data from Baker Hughes showed on October 9. As a result, Brent North Sea crude for delivery in November shed 13 cents to stand at Dollars 49.73 per barrel in afternoon London deals.
Analysts say oil prices are struggling to find a range, supported by expectations of lower supply in the future but depressed by a global surplus for a few time to come.
A combination of slower global economic growth and the lifting of trade sanctions on Iran is likely to see an over-supply of oil well into next year, according to the worldwide Energy Agency. Consumption worldwide will average 95.7 million barrels a day next year, about 100,000 a day less than projected in last month’s report.
OPEC trimmed its estimate of 2016 world oil demand growth by 40,000 bpd to 1.25-million bpd, citing slower growth in China. Opec also cut its forecast for oil production by non-members of the group, notably in the Americas, to 57.24 mbpd from 57.43 mbpd, predicting that it will dip to 57.11 mbpd next year.
Oil prices, which rose earlier on Tuesday, turned negative after the release of the IEA report.
However, oil prices soon turned negative, a decline partly attributed to profit-taking after USA crude prices jumped nine per cent last week.
“I see a decline in non-OPEC production and I see an increase in the call on OPEC”, he said.
In its report, OPEC pointed to a supply glut easing in 2016 and to a “more balanced” market.