IEA expects non-OPEC supply growth to outpace demand in 2013 and 2014.
Prices had touched an intraday high in electronic trading of $107.45.
Oil prices took a hit after the International Energy Agency predicted production from countries outside the Organization of the Petroleum Exporting Countries will rise by about 1.3 million barrels a day next year, an annual growth rate that “has only been achieved once in the last twenty years.” It estimated supply growth this year at 1.2 million barrels a day.
Meanwhile, the IEA said global demand is likely to grow 1.2 million barrels a day in 2014. That compares with an upwardly revised forecast for oil demand growth of 930,000 barrels a day this year.
And the IEA has yet to incorporate the IMF revision of global growth rates, according to Andrey Kryuchenkov, commodity analyst at VTB Capital. “The bottom line is: the supply cushion remains well in place, outpacing relatively modest consumption growth.”
The International Monetary Fund on Tuesday trimmed its forecast on world economic growth to 3.1% in 2013 and 3.8% in 2014, both 0.2 percentage points lower than the previous estimates.
Even so, prices in the prior day’s session rallied $2.99, or 2.9%, to $106.52 a barrel after the U.S. Energy Information Administration said crude stockpiles fell 9.9 million barrels for the week ended July 5. Analysts polled by Platts were looking for a decline of 3.8 million barrels.
For now, “both supply and demand currently appear to be in oil’s favor,” with the ongoing conflict in Egypt contributing to supply-side concerns, CMC Markets sales trader Miguel Audencial told clients Thursday. Read: Oil prices could be the next monster under the bed for the economy.
Political unrest and deadly violence in Egypt surrounding last week’s ouster of Mohammed Morsi as president have raised concerns about supply disruptions at the Egyptian-controlled Suez Canal and the Suez-Mediterranean pipeline, a key hub for oil producers.