Steam running out of rally for crude oil prices after data show market still out of balance. File photo by Monika Graff/UPI | License Photo
NEW YORK, Oct. 12 (UPI) -- Crude oil prices made a U-turn in early Wednesday trading after monthly data show a lingering gap between global supply and demand.
Crude oil prices have moved in volatile territory in recent days after passing the psychological threshold of $50 per barrel in recent sessions. Prices shot up considerably after a late September meeting of members of the Organization of Petroleum Exporting Countries produced a proposal to hold oil output steady in an effort to correct market imbalances.
Crude oil prices drifted lower for most of Tuesday after the International Energy Agency reported global oil supplies increased in September. Prices later got moderate support from Russian Oil Minister Alexander Novak, who said his country was on board with OPEC efforts to keep production levels in check in an effort to pull the market back into balance.
The situation reversed by the start of trading in New York after OPEC data confirmed the IEA's report. The price for Brent crude oil lost 1.3 percent from the previous session to open at $51.73 per barrel. West Texas Intermediate, the U.S. benchmark for crude oil prices, was down 1.6 percent to start the trading day at $49.97 per barrel.
According to OPEC's monthly market report, oil demand next year is expected to increase by 1.15 million barrels per day, against the anticipated increase of 1.24 million bpd average expected this year. Non-OPEC production next year should be higher than 2016 because of activity in Russia, while OPEC production was already higher than August levels by 22,000 bpd.
OPEC in its report said its 14 members combined for 33.39 million bpd last month, according to secondary sources. That level is higher than a limit proposed by cooperating ministers last month in Algeria. The group's market analysts, meanwhile, said the market was still out of balance.
"Inventories stand near all-time highs worldwide," the report read. "Although in recent weeks these high levels have been slightly drawn down."
On the economic front, markets turned lower on lingering concerns about how the British economy will leave the European Union. Eurostat, the record-keeping agency for Europe, said industrial production in August increased by 1.6 percent from July, which saw a decline.
Scotland, meanwhile, reported its economy grew in the second quarter by 0.4 percent for its highest quarterly rate since the beginning of last year. Cabinet Secretary for the Economy Keith Brown said the fundamentals of the Scottish economy are strong.
"But in the months surrounding the EU referendum, there is no doubt that businesses faced challenging circumstances and damaging uncertainty," he said. "These are global issues and Scotland is not immune."