Futures Movers: Oil prices finish at a more than 1-week low as IEA cuts global demand forecast

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Markets/commodities reporter

Markets reporter

Oil prices dropped Tuesday to finish at their lowest level in more than a week after the International Energy Agency cut its global crude-demand forecasts and warned of a boom in U.S. shale-oil production.

December West Texas Intermediate crude, the U.S. benchmark, CLZ7, -2.61%  fell $1.06, or 1.9%, to settle at $55.70 a barrel on the New York Mercantile Exchange after tapping a low of $55.18. The global benchmark, Brent crude for January LCOF8, -2.30% gave up 95 cents, or 1.5%, to $62.21 a barrel on the ICE Futures Europe exchange. WTI and Brent haven’t settled at levels this low since Nov. 3, according to FactSet data.

“Oil prices enjoyed a nice run to start the month of November, but the geopolitical backdrop that helped fuel that rally has quieted down considerably and the spike in U.S. production [reported] last week has once again presented a headwind for this energy market,” Tyler Richey, co-editor of the Sevens Report, told MarketWatch. “The path of least resistance for WTI is now back towards previous resistance at $54.”

Read: OPEC oil output drops as members stick to deal

Oil prices finished at a more than two-year high on Nov. 6 as a purge of high-level figures in Saudi Arabia under an anticorruption shake-up raised risks to supplies from the key oil producer.

Fresh insight on the state of the oil market came from the IEA 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 the leader in 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.

Expectations that OPEC 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 contributed to a fifth-straight weekly rise in WTI oil prices.

Expectations for an agreement extension is “a fundamental positive” for the oil markets, said Richey, in his latest newsletter, and “the outlook for oil remains positive right now after prices broke out to the upside in late October thanks to geopolitics and OPEC optimism.”

The Energy Information Administration last week, however, showed a “resurgence” in U.S. crude production that “could become a headwind on prices,” he said. “That could ultimately limit the upside potential for this oil rally, so the EIA data will be important to watch this week.”

A report on U.S. petroleum inventories from the American Petroleum Institute, which serves as a precursor to Wednesday’s EIA release, will be released late Tuesday.

Analysts polled by S&P Global Platts expect the EIA to report a fall of 1 million barrels in U.S. crude stockpiles for the week ended Nov. 10, They also expect to see supply declines 1 million for gasoline and 2 million for distillates, which including heating oil.

On Nymex, ahead of the data, prices for petroleum-products headed lower. December gasoline RBZ7, -2.15% fell 1.8% to $1.761 a gallon and December heating oil HOZ7, -1.80%  lost 1.3% to $1.907 a gallon. December natural gas NGZ17, -2.78%  ended at $3.102 per million British thermal units, down 2.1%.

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