Tuesday was a downbeat day for oil.
Investors were left licking their wounds after the International Energy Agency released a monthly market report that said the price rally oil has experienced in the back half of this year could be shorter-lived than investors expected. In the Tuesday report, the IEA also said that global oil demand could weaken for the rest of this year and into next year.
Following the report, WTI crude oil futures for December delivery declined $1.21, or 2.13%, to $55.55 per barrel in midday trading. Brent crude futures fell $1.30, or 2.06%, to $61.86 per barrel. Last week, both WTI and Brent benchmarks hit their highest levels since 2015.
Energy stocks also fell on the gloomier outlook. The Energy Select Sector SPDR ETF (XLE) dipped 1.31%, the Untied States Oil Fund LP ETF (USO) dropped 2.11% and the Vanguard Energy ETF (VDE) fell 1.33%.
The IEA slashed its oil demand forecast by 100,000 bpd for both this year and next year. They see demand growing by 1.5 million bpd in 2017 and by 1.3 million bpd in 2018. The Paris-based agency said higher prices and a relatively mild early winter contributed to their downward revision for demand. Rising output from OPEC member nations could tip the global market further into a surplus moving into 2018.
The IEA's monthly market report was more pessimistic than traders initially expected. The slowdown in oil consumption forecasted by the IEA conflicted with a Monday report from OPEC, which was more bullish on oil's future. OPEC raised its demand outlook by 130,000 bpd from an earlier estimate, meaning total oil demand by OPEC's measure will rise by 1.51 million bpd next year.
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