Oil markets struggled to find their footing on Wednesday after plunging by 7 percent the previous session, with surging supply and the specter of faltering demand keeping investors on edge.
Futures for West Texas Intermediate fell 7.1 percent to $55.69 a barrel on the New York Mercantile Exchange.
The IEA said in its monthly report that October output rose by 2.6 million barrels a day to 100.7 million barrels as producers heeded warnings that looming USA sanctions could mean a loss of Iranian oil to the market and thus lead to higher prices. Total volume traded on Thursday was about 23% higher than the 100-day average.
Oil prices have plunged more than $20 a barrel since the start of October, when Brent crude rose to almost $87 a barrel and United States benchmark West Texas Intermediate (WTI) traded around $77. The contract fell 26 cents to $59.93 on Monday, the lowest close since February 13. The global benchmark crude traded at a $10.16 premium to WTI for the same month.
But since May, Opec+ have ramped up output while at the same time the U.S. continued to grow its oil production, which reached a record of 11.6 million bpd earlier this month.
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At the same time, supply has been surging, especially due to a 22 percent rise in United States crude oil production this year to a record 11.6 million barrels per day (bpd).
For the first half of 2019, based on its outlook for non-OPEC production and global demand, and assuming flat OPEC production, the IEA said the implied stock build is 2 million bpd. Saudi Arabia is the largest crude oil producer within OPEC, although the USA and Russian Federation now produce more oil than the kingdom.
Following yesterday's price declines, this morning has seen a fresh wave of OPEC source reports, which have suggested that the cartel is looking at potentially delivering a 1.4mbpd oil output cut for 2019, in order to avoid an oil supply surplus that would pressure prices (Decision likely to be taken at the December 6th OPEC meeting).
Stocks of oil marketing companies too gained in value.
The IEA, in its monthly report, kept its forecast for global demand growth for 2018 and 2019 unchanged from last month at 1.3 million barrels per day and 1.4 million bpd, respectively.
Official storage data is due on Wednesday from the Energy Information Administration, with analysts expecting a 3 million barrel rise in commercial crude inventories.