Oil sank below $58 a barrel on Wednesday, nearing an eight-month low as traders grew impatient with OPEC’s haggling on details of an output cut and after the West’s energy watchdog cut its oil demand growth forecast.
U.S. crude lost 60 cents to $57.92 a barrel by 0840 GMT, deepening Tuesday’s $1.44 retreat to come near last week’s $57.75 low, the weakest since February. London Brent crude tumbled 64 cents to $58.70.
“We’re seeing a continuation from yesterday — there’s no firm decision on the OPEC cut and in the United States they’re saying that the winter will be warmer than expected. All these things point to lower prices,” said a ICE trader in London.
Adding to the bearish sentiment, the International Energy Agency (IEA) on Wednesday trimmed its forecast for global oil demand growth next year by 90,000 barrels per day (bpd) to 1.45 million bpd because of slightly weaker U.S. demand.
Despite OPEC’s apparent agreement on the principle of a 1 million-bpd output cut, a debate over the details of how and when to cut has held up a formal deal, its first cut in two and a half years to stem a more than $20 fall.
The main stumbling block appears to be whether to make a reduction from OPEC’s notional 28 million-bpd production ceiling or from actual supply of near 27.5 million bpd in September.
Iran’s OPEC governor said in the oil ministry’s Web site on Tuesday talks continued on the plan over the first supply cut since April 2004. Ministers remain undecided over whether to meet in person to formalize the cut before the next scheduled gathering on December 14, an official at OPEC’s Vienna headquarters said.
The U.S. Energy Information Administration (EIA) said on Tuesday in its monthly oil market report that actual supply cuts by OPEC as a group would be less than stated because cuts were prorated among its members based on previous quota levels, and several members were already producing below their quotas.
Despite the pledge to reduce supplies oil prices have yet to rebound, with traders fearing the action may be too little or too late to offset swelling inventories.
“Basically fundamentals are weak with accumulated stocks of crude oil and products, and maybe decreasing demand from Asian markets, other than China, and the U.S.,” said Keiichi Sano, manager with the commodities business unit at Sumitomo Corp.
U.S. data due on Thursday — a day later than usual — is expected to show an 800,000-barrel increase in crude stocks and a 100,000-barrel rise in distillate inventories, but a 500,000-barrel draw on ample gasoline stocks, a Reuters survey found.
U.S. government weather forecasters said on Tuesday they expected El Nino to bring warmer-than-average temperatures across much of the country for the winter season.
Supply concerns also eased after the Trans-Alaska Pipeline resumed service after an almost 10-hour shutdown due to flooding that caused communication problems on Tuesday.
The line carries about 750,000 bpd of crude oil to a terminal in Valdez in southern Alaska where tankers are loaded. BP’s 400,000-bpd Prudhoe Bay — the biggest oilfield in the United States — was also forced to shut down due to a power outage, but output was due to be restored late in the day.