12 Oct

Oil Prices: Analyzing the IEA’s Oil Market Report

WRITTEN BY Robert Scott FEATURED IN Commodities

IEA’s report

On October 12, the IEA (International Energy Agency) released its Oil Market Report. In the report, the IEA cut oil’s demand growth forecast by 0.1 MMbpd (million barrels per day) to 1.3 MMbpd and 1.4 MMbpd for 2018 and 2019, respectively. The cut might be a negative development for oil prices.

Oil Prices: Analyzing the IEA’s Oil Market Report

Supply disruption concerns?

Due to the rise in production from key suppliers, the spare capacity has contracted to 2% of oil’s global demand. The IEA expects that the spare capacity might contract more due to US sanctions on Iran that will be effective in November. Oil prices might be more sensitive to possible supply disruption concerns.

US crude oil prices

On October 11, US crude oil November futures fell 3% and settled at $70.97 per barrel. The inventory data might have dragged oil prices on the same day.

The Energy Select Sector SPDR ETF (XLE) fell 3.4% on October 11. The S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) both fell 2.1% on October 11. In Part 3 of this series, we’ll analyze US crude oil’s relationship with these equity indexes. Integrated energy stocks like ExxonMobil (XOM) and Chevron (CVX) are also sensitive to oil prices.

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