Oil traded below $57 a barrel as the International Energy Agency said OPEC-led production cuts aimed at clearing a global glut may falter next year.
Futures slipped 0.6 percent in New York after falling 2.4 percent the previous two sessions. While a glut in developed markets has shrunk, new supply from competitors including U.S. shale might grow faster than demand next year, thwarting efforts to drain what remains of a global surplus, the IEA said in its monthly report. American output last week rose to the highest in more than three decades, Energy Information Administration said Wednesday.
Oil is heading for a second yearly gain as the Organization of Petroleum Exporting Countries and its allies including Russia extend output cuts through the end of 2018. OPEC predicted global markets surplus inventories will be eliminated late next year after boosting forecasts for supplies from other rivals including the U.S., according to its monthly report on Wednesday.
“The oil market would be largely balanced” next year if the IEA’s forecasts prove correct, said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “Consequently, no further inventory reduction would be forthcoming.”
West Texas Intermediate for January delivery was at $56.29 a barrel on the New York Mercantile Exchange, down 31 cents, at 12:56 p.m. in London. Total volume traded was about 17 percent below the 100-day average. Prices slid 54 cents to $56.60 on Wednesday to close at the lowest in a week.
Brent for February settlement fell 25 cents to $62.19 a barrel on the London-based ICE Futures Europe exchange after falling 1.4 percent on Wednesday. The global benchmark crude traded at a premium of $5.87 to February WTI.
“On our current outlook, 2018 may not necessarily be a happy New Year for those who would like to see a tighter market,” the Paris-based IEA, which advises most major economies on energy policy, said in the report. “Total supply growth could exceed demand growth.”
U.S. crude output rose to 9.78 million barrels a day last week, the highest level in weekly data compiled by the EIA since 1983. Stockpiles dropped by 5.12 million barrels. Ineos Group Ltd. shut a crude unit at its Grangemouth refinery in Scotland after the Forties Pipeline System in the North Sea supplying the plant was shut to repair a crack.