Crude oil prices fell for the first time in four sessions on Tuesday after the International Energy Agency (IEA) warned that ample supplies will raise global inventories before investment cuts begin to significantly dent production. Oil stockpiles in member countries of the Paris-based Organisation for Economic Co-operation and Development (OECD) may approach a record 2.83 billion barrels by mid-2015, said the IEA, advisor on energy policy to a group of Western nations.
-- IEA says downward pressures may not have run their course
-- EIA keeps US 2015, 2016 production forecasts steady
-- US crude stocks rose last week: poll
US March crude futures fell $2.84, or 5.37 percent, to settle at $50.02 a barrel, after dropping to $49.86.
Brent March crude fell $1.91, or 3.3 percent, to settle at $56.43 a barrel, having fallen as low as $56.11. "It's the battle of the oil outlooks playing out here," said John Kilduff, partner at New York energy hedge fund Again Capital LLC. "The IEA report is a good reminder that there's still a lot of supply to come and it doesn't give much hope for the bulls who say we've hit bottom and are now on the way up."
While the supply-demand balance in oil was expected to tighten by end-2015, the IEA cautioned that "downward market pressures may not have run their course just yet." The IEA also predicted that demand for oil from the Organisation of the Petroleum Exporting Countries (Opec) will hold at 29.4 million barrels per day (bpd) this year, and said US shale oil output growth will pause before regaining momentum.
The IEA's outlook was more bearish than Opec's monthly report on Monday which forecast 2015 demand for oil from its members will rise to 29.2 million bpd, up 430,000 bpd from an earlier forecast. The US Energy Information Administration (EIA) added to the bearish sentiment in a separate report on Tuesday that kept its 2015 and 2016 domestic oil production expectations virtually unchanged from the previous month.
Swiss-based, Dutch-owned commodity trading company Vitol's Chief Executive Ian Taylor also gave a bearish view when he told the International Petroleum Week conference in London that he expects a "dramatic" build in oil stocks over the next few months. Ahead of weekly oil inventory reports, analysts polled by Reuters estimated that US crude stockpiles likely rose 3.7 million barrels last week, pushing stockpiles to a fresh record high. The American Petroleum Institute, an industry group, will release its weekly report on Tuesday at 4:30 pm EST, followed by the EIA's report on Wednesday.