Oil drops toward $40 as IEA sees 2016 slowdown in global demand


Published: Nov 13, 2015 11:24 a.m. ET

IEA: near record OECD stocks offer ‘unprecedented’ buffer against supply disruptions
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An oil rig outside Watford City, North Dakota.


Oil futures dropped toward $40 a barrel on Friday, poised for their largest weekly decline since March after a top energy watchdog warned of a slowdown in global oil demand next year.

Natural-gas prices, meanwhile, bucked the trend in the energy sector to trade higher after data showed that supplies rose as expected.

December West Texas Intermediate crude CLZ5, -2.25% dropped $1.17, or 2.8%, to $40.58 a barrel on the New York Mercantile Exchange, set for a weekly loss of 8.5%. That would be the largest weekly loss since 9.6% decline for the week ended March 13.
On its expiration day, December Brent crude LCOZ5, -0.52% fell 40 cents, or 0.9%, to $43.66 a barrel on London’s ICE Futures exchange. January Brent crude, which will become the front-month contract, fell 66 cents, to $44.53.

In its monthly report Friday, the International Energy Agency said global oil demand growth will slow to 1.2 million barrels a day in 2016, after surging to 1.8 million barrels a day this year, a five-year high.

The IEA also said that stockpiles at a near-record three billion barrels are providing world markets with a degree of comfort and offer an “unprecedented buffer” against unexpected supply disruptions.

The stockpiles among the countries in the Organization for Economic Cooperation and Development “could protect the market from a supply crunch should there be a lengthy spell of cold temperatures,” the IEA said. “But the current forecast is for a mild winter in Europe and the U.S. If it turns out to be true, bulging stock levels will add further pressure and oil market bears may choose not to hibernate.”

The supply overhang was especially pronounced in U.S. government data on Thursday, which showed an increase of 4.2 million barrels in crude supplies for the week ended Nov. 6.

“Over the past few months prices have been receiving support from declining U.S. oil production. However, with U.S. production increasing again, prices are losing their support…pushing momentum back into bearish territory,” said Daniel Ang, analyst at Phillip Futures.

The market will get an update on the latest U.S. oil rig count later Friday from Baker Hughes BHI, -0.23% Last week, data showed a 10th-consecutive week of declines.

On Nymex Friday, December gasoline RBZ5, -0.90% traded at $1.254 a gallon, down 1.9 cents, or 1.5%, trading about 8.4% lower for the week, while December heating oil HOZ5, -0.38% fell 1 cent, or 0.7%, to $1.397 a gallon, set for a weekly loss of roughly 6.3%.

Natural-gas prices, however, rallied, with the December contract NGZ15, +4.20% jumping 9 cents, or 4%, to $2.35 per million British thermal units, but still trading about 1% lower on the week.

The U.S. Energy Information Administration reported that supplies of natural gas rose 49 billion cubic feet for the week ended Nov. 6. Analysts polled by Platts were looking for climb of between 49 billion cubic feet and 53 billion cubic feet.

—Summer Said contributed to this article.

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