Oil Slips Below $103 As IEA Sees Market Easing

Brent crude oil slipped below $103 per barrel on Tuesday, caught between hopes of a revival in global economic growth and worries over demand after bearish reports from the West’s energy watchdog.

Economic data show the world’s two biggest economies and oil consumers are picking up steam, increasing demand for fuel, despite slowing consumption in Europe.

But global oil supplies are ample and the International Energy Agency (IEA) on Tuesday painted a bearish outlook for the oil market over the next few years, with rapidly increasing non-OPEC oil output meeting most of the world’s extra oil demand.

“Following several years of stronger-than-expected North American supply growth, the shockwaves of rising U.S. shale gas and light tight oil and Canadian oil sands production are reaching virtually all recesses of the global oil market,” the IEA said.

“The good news is that this is helping to ease a market that was relatively tight for several years,” IEA executive director Maria van der Hoeven said in a statement.

Brent crude oil futures fell 10 cents to $102.72 a barrel by 0830 GMT, after settling down $1.09 on Monday. U.S. oil lost 8 cents to $95.09, after ending 87 cents lower. Both contracts fell the most in nearly two weeks in the previous session.

A stronger dollar also helped cap oil prices. A firm dollar makes commodities priced in the greenback more expensive for holders of other currencies.

The IEA said in its closely watched semi-annual report, which analyses mid-term global oil supply and demand trends, that U.S. shale oil will help meet most of the world’s new oil demand in the next five years, even if the global economy picks up steam.

This will leave the need for OPEC crude barely changed from today’s levels, said the agency, which advises major oil consuming nations.

Hopes of a U.S. recovery is causing the U.S. benchmark to rise faster than Brent. Goldman Sachs expects the Brent-WTI crude spread to drop to $5 a barrel in third quarter of 2013 with the supply balance at the West Texas Intermediate delivery point of Cushing, Oklahoma already in deficit.

North Sea Brent held a near $20 premium for much of 2012 over WTI, but the spread has fallen to less than $8 with the completion of pipeline projects such as the Permian Express, Longhorn and West Texas Gulf Expansion.

U.S. commercial crude oil stockpiles were seen slightly higher last week after hitting record high inventories over the prior two weeks while gasoline inventories were seen lower, a preliminary Reuters poll of eight analysts showed.

The survey, ahead of weekly inventory reports from the American Petroleum Institute and the U.S. Department of Energy’s Energy Information Administration, forecast crude stocks to rise 200,000 barrels on average.

Brent is expected to rise to $103.77 before dropping towards $101.35, while U.S. oil may revisit its May 10 high of $96.24, Reuters technical analyst Wang Tao says.