May 16 (UPI) -- Crude oil prices turned lower in early Wednesday trading after the International Energy Agency said the market was creating economic headwinds.
The International Energy Agency in its latest monthly market report, released Wednesday, revised its global demand forecast lower by about 6.5 percent to 1.4 million barrels per day for 2018.
"While recent data confirms strong growth in first quarter 2018 and the start of second quarter 2018, we expect a slowdown in the second half of the year largely attributable to higher oil prices," the IEA stated.
The U.S. Commerce Department on Tuesday said consumer spending increased marginally last month, noting that higher gasoline prices were eating away at discretionary spending. Retail gasoline prices are up 6 percent since the start of the month and, while a switch to a more expensive summer blend is contributing to the rise, the decision by U.S. President Donald Trump to walk away from the Iranian nuclear agreement was a supporting factor.
"The fact is that crude oil prices have risen by nearly 75 percent since June 2017," the IEA's report added. "It would be extraordinary if such a large jump did not affect demand growth, especially as end-user subsidies have been reduced or cut in several emerging economies in recent years."
The IEA's sentiment was driving crude oil prices lower. The price for Brent crude oil, the global benchmark, was down 0.82 percent to $77.79 per barrel as of 9:15 a.m. EDT. West Texas Intermediate, the U.S. benchmark, was down 0.67 percent to $70.83 per barrel.
The downward trend was supported by data released late Tuesday by the American Petroleum Institute showing U.S. crude oil inventories increased last week by 4.8 million barrels. An oversupply situation two years ago pushed the price of oil below $30 per barrel and if U.S. estimates published later in the day on Wednesday line up with API, crude oil prices could move even lower.
In the economy, Japan, the third-largest economy in the world, reported its economy shrank 0.6 percent annually, its first contraction since fourth quarter 2015.
In late January, the Bank of Japan voted 8-1 to apply a negative interest rate to its policy rate and economists at the Organization of Petroleum Exporting Countries said at the time the rate may be so low it can't stimulate the economy any further. In its global outlook, the International Monetary Fund said Japan's economy could experience negative growth by next year.
Elsewhere, the IEA said in its monthly report that geopolitical factors were influencing crude oil markets as the lack of spare market capacity means there's little appetite for uncertainty or risk. Through his Twitter account, Donald Tusk, the president of the European Council, signaled the historic alliance with the United States was unraveling with Trump at the helm.
"With friends like that who needs enemies," he stated.