Futures Movers: Oil ends mixed after IEA forecasts on global demand and non-OPEC output

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Markets/commodities reporter

Oil futures saw a mixed finish, with the U.S. benchmark edging lower and the global benchmark holding a small gain after the International Energy Agency forecast strong global crude demand, but raised concerns about a ramp-up in output by non-OPEC producers.

The IEA said an inundation of the market from outside of the Organization of the Petroleum Exporting Countries, mostly driven by shale-oil producers in the U.S., might resemble a period back in 2014, when ballooning production capsized crude prices.

Read: Booming U.S. shale supply will overwhelm oil demand, says IEA

“Market conditions in early 2018 seem to be reminiscent of the first wave of U.S. shale growth, prompting the IEA to warn history could be repeating itself,” wrote Robert Yawger, director of energy at Mizuho, in a Tuesday research note.

But the IEA also said that “the more positive global economic picture published by the International Monetary Fund is a key factor in raising our growth outlook to 1.4 [million barrels a day]” in 2018.

Inventories held by countries in the Organization for Economic Cooperation and Development, meanwhile, saw a drop of 55.6 million barrels in December, the steepest drop since February 2011, the IEA said.

The U.S. benchmark, March West Texas Intermediate crude CLH8, -0.24% fell 10 cents, or 0.2%, to end at $59.19 a barrel on the New York Mercantile Exchange. Meanwhile, April Brent crude LCOJ8, +0.21% the global benchmark, added 13 cents, or 0.2%, to $62.72 a barrel on the ICE Futures Europe exchange.

“The IEA’s mention of global stockpiles in developed nations declining towards the 5-year average is a near term positive for the market…,” said Tyler Richey, co-editor of the Sevens Report.

“But more notably, the IEA was the third major energy organization this week (along with the EIA and OPEC) to emphasize the fact that U.S. production is surging,” he said. “For now, that has become the dominant influence on oil prices as futures have fallen well over 10% from their recent highs.”

Although Monday’s session ended slightly higher for WTI oil futures, the day was marked by heightened concerns about output increases.

On Monday, the U.S. Energy Information Administration said shale crude-oil production from seven major U.S. oil regions is expected to see a monthly climb of 110,000 barrels a day in March to 6.756 million barrels a day.

That report was released about a half-hour before crude contracts closed on Monday and combined with recent reports from OPEC signaling similar expectations for increased output, helped to pare earlier WTI oil gains.

The OPEC-led plan, which the participants agreed to extend through the end of this year, helped to boost Brent by more than 50% in the second half of 2017 to around $70 a barrel, even as the price rise motivated shale producers in the U.S. to ramp up production.

Looking ahead, traders await the weekly U.S. petroleum supply and production report from the EIA due out Wednesday. Trade group the American Petroleum Institute will issue its own data late Tuesday.

Analysts polled by S&P Global Platts expect the EIA to report a rise of 3 million barrels in crude stockpiles for the week ended Feb. 9. They also forecast a supply rise of 1.5 million for gasoline and decline of 1 million for distillates, which include heating oil.

March gasoline RBH8, +0.38%  rose 0.4% to settle at $1.6853 a gallon, while March heating oil HOH8, -0.13%  fell 0.1% to $1.8369 a gallon.

March natural gas NGH18, +1.80%  tacked on 1.7% to $2.594 per million British thermal units, after losing 1.2% on Monday.

—Christopher Alessi contributed to this article

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