U.S. West Texas Intermediate and international-benchmark Brent crude oil finished down on Thursday, but off its lows after the U.S. Energy Information Administration reported a larger-than-expected decline in U. S. inventories and a falloff in weekly production on Thursday.
According to the EIA, crude inventories fell by 2.7 million barrels in the week to October 6 compared with analysts’ expectations for a decrease of 2 million barrels. Distillate stocks fell by 1.5 million barrels, short of expectations for a drop of 2.2 million barrels.
In other news, the International Energy Agency said on Thursday demand for OPEC oil would be 32.5 million barrels per day next year – around 150,000 bpd lower than the cartel pumped last month.
The price action in the crude oil markets on Thursday suggests investors were more concerned about future demand than the weekly inventories picture. From this we can conclude that the outlook for the market over the near-term is likely to be bearish because of the forecast for lower oil demand in 2018.
Traders are saying the one of the IEA report was bearish because it suggested that demand for OPEC crude next year would not be sufficient to absorb all the available supplies. This likely means OPEC must deepen its production cuts to finish its job of bringing oil stocks back to the five-year average.
This supports what I have been saying all along that prices are likely to remain rangebound until OPEC and other major producers vote to extend the production cuts beyond the May 2018 deadline and also decide to deepen those production cuts.
This article was originally posted on FX Empire
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