Oil prices drop as IEA warns of 'enormous' stockpiles

June 15, 2016 | 10:00

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Crude futures fell for a fourth session running on Tuesday as the International Energy Agency warned that huge stockpiles would cap any future price gains.

File photo of an oil rig. (AFP Photo)

NEW YORK: Crude futures fell for a fourth session running on Tuesday (Jun 14) as the International Energy Agency warned that huge stockpiles would cap any future price gains.

In New York, US benchmark West Texas Intermediate for July delivery shed 39 cents to US$48.49 a barrel. In London, Brent North Sea crude for delivery in August was down 52 cents at US$49.83 a barrel.

The IEA said in its monthly report that it expects global crude demand to grow by 1.3 million barrels a day this year and again next year, with buyers encouraged by low prices.

Even so, it said, "There is an enormous inventory overhang to clear," the IEA said. "This is likely to dampen prospects of a significant increase in oil prices."

Worries about big stocks have caused the oil price to fall back from this year's high of around $51 reached early last month, the agency said.

That echoed Monday's report from the OPEC oil cartel, which said that "speculators became somewhat less interested in long positions" because of the overhang in inventories.

The IEA added in the report that there is a "huge number of moving parts" in the current oil market environment, making accurate predictions hazardous.

They include Iran's sharp increase in output, political turmoil in Libya that has contained its output, Nigeria's security problems, Canada's slow return to full output after forest fires curtailed production from its oil sands hub and a possible rebound in US production encouraged by firmer prices.

AFP

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