Oil prices fell on Wednesday after the International Energy Agency (IEA) and OPEC warned of impending oversupply and as COVID-19 cases in Europe increased the downside risks to demand recovery, though a fall in U.S. gasoline stocks curbed losses.
Brent crude futures dropped 79 cents, or 1%, by 1038 GMT to $81.64 a barrel, erasing Tuesday’s 38 cent gain.
U.S. West Texas Intermediate (WTI) crude futures fell 94 cents, or 1.2%, to $79.82 a barrel, extending a 12 cent loss from Tuesday.
The IEA on Tuesday warned that while the “oil market remains tight by all measures, … a reprieve from the price rally could be on the horizon … due to rising oil supplies”.
The agency said that high price levels will see U.S. oil production rising again in 2022, accounting for about 60% of its forecast of 1.9 million barrels per day for non-OPEC supply growth.
On Tuesday, OPEC Secretary General Mohammad Barkindo said the group sees signs of an oil supply surplus building from next month adding that its members and allies will have to be “very, very cautious”.
New waves of COVID-19 cases in Europe which drove some governments to reimpose restrictions also weighed on prices.
“The impact has thus far been negligible,” oil brokerage PVM’s Stephen Brennock said. “That being said, the risk is there for the situation to escalate and mobility levels to be severely undermined in the coming months,” he added.
A larger than expected fall in U.S. gasoline stocks capped some losses.
Data from the American Petroleum Institute industry group showed on Tuesday gasoline stocks fell by 2.8 million barrels for the week ended Nov. 12, according to market sources.
The drawdown was much bigger than the 600,000-barrel decrease that 10 analysts polled by Reuters had expected.
Crude inventories rose by 655,000 barrels, the market sources said, compared with expectations for a 1.4 million barrel build, while distillate stocks rose by 107,000 barrels.
Official Energy Information Administration data is due later on Wednesday.