Monitoring/commodity markets

The International Energy Agency (IEA) yesterday again lowered its forecast for global oil demand in 2014 - by 0.2 million barrels per day, to 92.4 million barrels per day. The agency explained this reduction by expectations of weaker global economic growth than previously predicted.

Following news from the IEA, oil prices fell to a four-year low yesterday. The futures price for Brent for November on the London ICE Futures exchange dropped to $86.27 per barrel by 18:00 Moscow time, which was the minimum since December 2010. November futures contracts for WTI on the New York Exchange (NYMEX) by this time fell to $84.44 per barrel. “The IEA report is simply killing Brent,” said Bob Yager, director of the futures division of Mizuho Securities USA Inc. in New York. “The agency has lowered its oil demand forecast for the fourth month in a row. This is a huge downside risk for the market.”

Against the backdrop of declining demand, global oil supplies are still only growing. In September, according to the IEA, they increased by 0.9 million barrels per day, to 93.8 million barrels, compared to August due to an increase in oil production by both countries belonging to the Organization of Petroleum Exporting Countries (OPEC) and and those not included in it. OPEC production rose last month to its highest level in 13 months. In September, compared to August, supplies increased by 0.4 million barrels per day, to 30.7 million barrels. The growth is associated with an increase in supplies of raw materials from Libya and Iraq.

OPEC, meanwhile, does not promise to reduce production rates to reduce the supply of raw materials on the market. According to Kuwait's oil minister, the cartel's oil supply target is unlikely to be changed at the November 27 meeting. “If OPEC does not start cutting production, then in the first half of 2015 supply will exceed demand by 2 million barrels per day,” says Olivier Jacob, head of the consulting firm Petromatrix.

It follows from the IEA report that the increase in global oil demand in 2014 may be minimal since the crisis year of 2009. For 2015, the agency predicts a slightly more active increase in global demand - to an average of 93.25 million barrels per day, which is 0.3 million barrels per day lower than the previous IEA forecast for next year.

Vadim Visloguzov

Oil prices hit a four-year low