Oil prices down on expectations that supply growth will exceed demand

ISTANBUL

Oil prices decreased on Wednesday with expectations that global supply growth will outpace demand growth, despite fresh predictions that the new surge in COVID-19 cases will not curb the oil demand recovery as much as previously anticipated.

International benchmark Brent crude was trading at $72.84 per barrel at 0639 GMT for a 1.17% decrease after closing the previous session at $73.70 a barrel.

American benchmark West Texas Intermediate (WTI) was at $69.78 per barrel at the same time for a 1.34% loss after trade ended at $70.73 a barrel in the previous session.

The International Energy Agency (IEA), in its oil market report published on Tuesday, revised down its global oil demand estimates for 2021 and 2022 by around 100,000 barrels per day (bpd) compared to last month's assessment due to the new surge in COVID-19 cases.

The agency attributed its revision to the new containment measures put in place to halt the spread of the virus, which are projected to have an immediate impact on air travel and jet fuel consumption.

"A new surge in COVID-19 cases is expected to slow, but not derail, the recovery in oil demand that is underway," the IEA said.

According to the agency, global oil production is poised to outpace demand starting from December, as the US and OPEC+ led by Saudi and Russia ramp up more output to provide relief to a tight oil market.

"As this upward supply trend extends into 2022, the US, Canada and Brazil look set to pump at their highest ever annual levels, lifting overall non-OPEC+ output by 1.8 million bpd in 2022. Saudi Arabia and Russia could also hit records if the remaining OPEC+ cuts are fully unwound. In that case, global supply would soar by 6.4 million bpd next year compared with a 1.5 million bpd rise in 2021," the IEA said.

In contrast, the Organization of the Petroleum Exporting Countries (OPEC) on Monday had raised its world oil demand forecast for the first quarter of 2022.

Late Tuesday, the American Petroleum Institute (API) announced its estimate of a fall of 815,000 million barrels in US crude oil inventories, well below the market expectation of a drop of 2.6 million barrels.

The projection of a less-than-expected inventory fall also added to the negative market sentiment, putting downward pressure on prices.

The US Energy Information Administration's official oil stock data will be released later on Wednesday.