Oil prices sink after International Energy Agency's outlook

Javier Stokes
October 14, 2017

Oil prices edged up on Wednesday, rising for a third day on signs that markets are gradually tightening after years of oversupply, although the outlook for 2018 remained less certain.

Oil slid as investors waited to see if US government data will confirm that crude stockpiles rose last week, and as the International Energy Agency warned of a ceiling for prices next year. U.S. West Texas Intermediate (WTI) crude was at $51.41 per barrel, up 81 cents from its last settlement.

Brent, the global benchmark, rose 52 cents, or 0.9%, to $56.77 a barrel. In China, the world's second-biggest oil market, crude imports in September jumped to the second-highest on record.

"According to the IEA's calculation, at the current level of OPEC production there will be no global stock draws next year", said Olivier Jakob, managing director of consultants Petromatrix GmbH in Zug, Switzerland.

Chinese oil imports hit 9 million barrels per day (bpd) in September, data showed on Friday.

China's huge imports have been strongly driven by purchases for its strategic petroleum reserves.

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The nation has spent around $24 billion building its crude reserves since 2015 and now holds around 850 million barrels of oil in inventory, according to the International Energy Agency (IEA).

Unrest in Iraq, and possible USA action on the Iran nuclear deal, also underpinned prices.

President Donald Trump is expected to reveal in a speech Friday afternoon whether he will certify a 2015 worldwide agreement with Iran to curb the Islamic Republic's nuclear program in exchange for economic sanctions relief.

The step would give the U.S. Congress 60 days to decide whether to impose sanctions, but Iran's parliament speaker told the TASS news agency that decertification would "be the end" of the deal and cause "global chaos". At least 6,000 Kurdish fighters have been deployed in the oil-rich Kirkuk province following "threats" of attack from Iraqi forces, media network Rudaw reported.

Many oil traders have said the reason OPEC has been compliant with the production cut agreement was because Saudi Arabia wanted the cuts to work to prop up oil prices ahead of the Aramco IPO.

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