WTI hits 3-month low after IEA boosts 2014 non-OPEC supply forecast

West Texas Intermediate crude fell to the lowest since early July after the International Energy Agency predicted that non-OPEC supplies will rise in 2014 by the most in three decades. The U.S. is also expected to overtake Russia as the worlds biggest producer due to the American shale oil boom.

On the New York Mercantile Exchange, WTI crude for delivery in November fell by 1.99% to $100.96 per barrel at 13:24 GMT. Prices held in range between days high of $102.97 per barrel and low at $100.63, the weakest level since July 2. The American benchmark rose by 1.2% on Thursday but extended its weekly decline to over 2.6% after Fridays retreat.

Meanwhile, Brent futures for November settlement traded lower throughout the day and stood at $110.82 per barrel at 13:22 GMT, down 0.88%. Prices shifted in days range between $111.91 and $110.54 per barrel. The European benchmark rose by 2.5% on Thursday and trimmed its weekly advance to 1.3% after falling on Friday.

The oil market was pressured after the International Energy Agency said that non-OPEC producers will increase their output in 2014 by 1.7 million barrels per day to 56.4 million, led by the U.S., Canada and Kazakhstan. The Paris-based adviser boosted its forecast by 300 000 from its previous estimate in September. Increased output form producers outside OPEC will offset supply shortages from some of the groups members, which are expected to pump an average 29 million barrels per day in 2014, 100 000 less than EIAs previous forecast and 1 million below the groups current pace. Kazakhstan had the biggest contribution for the upward revision after the start of the Kashagan field added 140 000 barrels per day.

The IEA said that production in the Organization of the Petroleum Exporting Countries fell by 645 000 bpd to a two-year low of 29.99 million bpd in September due to supply outages in Iraq and Libya. The African countrys output fell to a tenth of its capacity in the beginning of September as armed protesters closed most of the nations oilfields and export terminals, while Iraq idled its southern oil terminal for maintenance works. Saudi Arabia, the groups leading producer, maintained its output above 10 million barrels per day for a third straight month.

Hannes Loacker, an analyst at Raiffeisen Bank International AG (RBI) in Vienna, said for Bloomberg: “Prices dropped after the IEA published their monthly forecast. If the IEA picture on the supply side is correct, there is a real risk that Brent prices will drop below $100 a barrel during 2014.”

At the same time, the agency cut its global demand growth forecast for 2014 by 100 000 barrels from its latest estimate. Global consumption is expected to increase by 1.1 million barrels per day, or 1.2%, to 92 million bpd.

The report also showed that the U.S. is expected to overtake Russia as biggest producer of oil thanks to the American shale oil boom. Production in the country is expected to surge by 830 000 barrels per day in 2014, or 8.1%, to 11 million bpd per day due to supply growth from the Bakken and Eagle Ford deposits. This comes days after government estimates showed that the dramatic increase in domestic output has boosted the nations self-sustainability so drastically that it was surpassed by China as worlds top oil importer.

“With output of more than 10 million barrels per day for the last two quarters, its highest in decades, the nation is set to become the largest nonOPEC liquids producer by the second quarter of 2014, overtaking Russia. And thats not even counting biofuels and refinery gains,” the International Energy Agency added.

Debt limit stalemate seen ending

Oils losses however remained limited on optimism that the U.S. political standoff will come to an end maybe by the end of the week. House Speaker John Boehner and other Republican leaders met with President Barack Obama on Thursday to discuss a short-term solution of the debt ceiling deadlock, pushing back the deadline from October 17 to November 22 with no policy conditions attached. President Obama was reported to have rejected the plan, but Republican Paul Ryan told reporters he had neither accepted nor rejected the offer. Despite the lack of conclusion, the discussion and proposal were viewed by market players as a step forward and fanned optimism that the political standoff will be resolved soon. The debt limit vote could be held as early as today.

According to a Bloomberg news survey, WTI is likely to advance next week as most investors see the U.S. political crisis resolved by the end of the week. Fourteen out of 33 participants, or 42%, wagered that prices will rise, while eleven analysts, or 33%, expected a decline. The remaining eight predicted no change.

Markets were also spooked yesterday after Libya’s Prime Minister Ali Zeidan was arrested on Thursday by a group called Libya Revolutionaries Operations Room and held at a Tripoli hotel. Although he was released several hours later, militia violence in the North African country, which holds the continent’s biggest crude reserves, continues to fan concern that the nation’s legitimate government could once again lose control over its oil production and exports.