Futures Movers: Oil prices drift south as IEA cuts global demand forecast

Oil prices slipped Tuesday after the International Energy Agency cut its global oil-demand forecasts, in contrast to a more bullish outlook from OPEC released a day earlier.

The U.S. benchmark, West Texas Intermediate crude for December delivery CLZ7, -0.56%  fell 28 cents, or 0.5%, to $56.48 a barrel, while the global benchmark, Brent crude for January LCOF8, -0.49% gave up 32 cents, or 0.5%, to $62.84 a barrel.

Read: OPEC oil output drops as members stick to deal

Both benchmarks hit 28-month highs early last week, boosted by expectations that the Organization of the Petroleum Exporting Countries and other major crude producers will agree at the end of the month to extend an agreement on output curbs beyond its March end-date.

Fresh insight on the state of the oil market came from the IEA on Tuesday, which in its monthly report cut its crude-demand outlook by 100,000 barrels a day for 2017 and 2018. However, on Monday, the Organization of the Petroleum Exporting Countries raised its forecast for oil demand this year and in 2018.

Releasing its World Energy Outlook report at the same time, the IEA said the U.S. is on track to become a lead oil and gas production by 2025, due to an unprecedented boom in U.S. shale crude production that would continue weighing on near-term prices.

Looking ahead, a report on inventories from the American Petroleum Institute, which serves as a precursor to Wednesday’s Energy Information Administration release, will be closely watched.

“Further drawdowns may well continue to support the rally although having already risen significantly since the summer, I do wonder how much higher prices can go before output starts to rise again, particularly from U.S. shale companies,” said Craig Erlam, senior market analyst at OANDA, in a note to clients.

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