Energy agency: Global oil supply jumps, sending prices lower

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What has been made apparent by OPEC and the IEA is that oil demand growth is slowing, while oil supply, most notably from the U.S. is rising to record levels at a rapid rate.

Oil prices are back down to "more reasonable" levels, which should provide relief for consumers, a particularly welcome development for emerging markets that have seen their currencies rocked this year. Iran is reputed to be the third largest member of the Organisation of Petroleum Exporting Countries (OPEC) and the global oil industry. But what the selloff really comes down to is the interplay of supply and demand, and the changing dynamics of both. The sanctions, which went into effect on November 5, would functionally have cut off or penalized importers of Iranian oil, and judging from the runup in prices before this month, it was nearly as though investors thought Iran's exports would drop to zero - which they never would have.

Riyadh indicated on Monday it was on course to ignore the U.S. president's wishes at OPEC's next meeting due in December because it saw a need to reduce OPEC output by a collective one million barrels per day during 2019.

The IEA, in its monthly report, kept its forecast for global demand growth for 2018 and 2019 unchanged from last month at 1.3 million barrels per day and 1.4 million bpd, respectively. The only question is by how much the group will be reducing. However, as has been the case recently, the talk of potential supply cuts has been quickly criticized by President Trump. Saudi Arabia said that it alone would slash 500,000 bpd in December. On Monday, it was the Saudis that made headlines with the promised 500,000-bpd cut, while reductions from the rest of the group were unclear. As prices recovered through the summer, US oil output topped 11 million bpd - contributing one million bpd to a 1.8-million-bpd increase in global output since May, according to the IEA. Reuters reports that OPEC+ is now considering a cut of 1.4 mb/d for 2019.

One of the three sources said a minimum cut of 1 million bpd was being considered and it could be larger than 1.4 million bpd.

But OPEC officials hope Moscow will come round eventually. Russian Energy Minister Alexander Novak said on Wednesday no emergency action was warranted to stem the decline in prices. "We have to look into long-term development, into how the price will be stabilised", he said in Singapore.

The IEA too suggested that the building of inventories, which could accelerate, is not the worst thing in the world.

USA bank Morgan Stanley said in a note on Wednesday that China's economic "conditions deteriorated materially" in the third quarter of 2018, while analysts at Capital Economics said China's "near-term economic outlook still remains downbeat". Brent Crude sank 6.6 percent to $65.47 a barrell.

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