The Benchmark US oil prices slipped to a six week low, dealing a major blow to recovery efforts after a key watchdog announced that oil production is increasing at a higher-than-expected rate.
According to a report by the Paris-based energy adviser, International Energy Agency, a record increase in US oil stockpiles may soon overstretch the country’s storage capacity, setting the stage for a slump in prices and curbing the country’s output.
West Texas Intermediate, the US benchmark slumped $1.69 or 3.6% to $45.36 on the New York Mercantile Exchange at the close on Friday. WTI lost 9.6% for the week on an increase in US inventories and a stronger dollar.
An Easing in the surge by the dollar had earlier raised expectations that oil was on the path to recovery but these hopes were thwarted by the gloomy output.
Bullish Data released by the US Department of Energy showing a sharp decline in the number of rigs in the US failed to inspire the market.
Brent, the international benchmark slipped $1.02 to slightly below $ 55 on the London-based ICE futures market- a four week low
“The market moved lower on the back of the report,” Ole Hansen, an analyst at Saxo Bank A/S, told Bloomberg by e-mail from Copenhagen.
“Continuing inventory builds are keeping the focus on whether storage may fill up. It’s becoming increasingly clear that, barring any major geopolitical event, the risks are pointing to lower oil prices.”
Data from the report by the IEA also showed that US production would expand by an unprecedented 750, 000 barrels to about 12.6 million barrels a day against the 12.4 million barrels a day forecast by analysts polled by Reuters.
The report also showed 1.3 million barrels per day year on year to more than 94 million barrels a day led by 1.4 million barrels per day increase in non-OPEC countries.
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