Oil Prices Decline as IEA Sees Demand Slowdown

Oil Prices Decline as IEA Sees Demand Slowdown

Crude oil prices decline on Wednesday after a report showed another unexpected oversized rise in the United States (US) inventories. In a report, the International Energy Agency (IEA) said global demand growth is slowing as production rises.

West Texas Intermediate crude oil for October delivery was last seen down US$0.04 to US$87.27 per barrel, while November Brent crude, the global benchmark, was down US$0.07 to US$93.10.

In its weekly survey, the American Petroleum Institute said US oil inventories rose by 6.04 million barrels last week, while the consensus analyst estimate called for a small draw on stocks, Oilprice.com reported.

It was the second-straight big weekly rise in US inventories and came as the United States released 8.4 million barrels from its strategic reserves. The Energy Information Administration will release official figures later on Wednesday morning.

Prices fell on Tuesday after the United States reported inflation ran hotter than expected in August, pushing commodities and stocks lower on concerns that the Federal Reserve will impose another big hike in US interest rates when its policy committee meets next week, increasing the odds of a demand-destroying recession.

In its influential monthly Oil Market Report, the IEA trimmed its outlook for 2022 demand growth to two-million barrels per day, rising to 2.1-milion bpd in 2023, a small drop from its August report.

“Growth in global oil demand continues to decelerate, weighed down by renewed Chinese lockdowns and an ongoing slowdown in the OECD. This is partly offset by large-scale switching from gas to oil, estimated to average 700 kb/d during 4Q22 and 1Q23, double the level of a year ago,” the agency noted.

The IEA noted world oil production rose by 0.79-million in August to 101.3-million bpd on higher output from Libya and Saudi Arabia while output from Nigeria, Kazakhstan and Russia dropped.