Meanwhile, DNV GL says oil demand will peak in three years: File Image/Pixabay
Confirmation on Wednesday that U.S. crude stockpiles fell substantially - rumours of which resulted in oil prices rising in the previous session - was not enough to detract from a brand new fear that has gripped traders: that the U.S. may ease its hard-line stance on Iran and trigger a flood of product from the Islamic republic.
Accordingly, Brent settled $1.57, or 2.5 percent lower, at $60.81 per barrel, while West Texas Intermediate fell $1.65, or 2.9 percent, to end the session at $55.75 per barrel.
Giovanni Staunovo, oil analyst for UBS, worried that if Washington eases its stance on Iran and triggers a surge in output, "This outcome would make the OPEC+ target to keep the oil market in balance even more challenging in 2020" - a reference to the Organization of the Petroleum Exporting Countries' ongoing output cuts.
Giovanni Staunovo, oil analyst, UBS
This outcome would make the OPEC+ target....even more challenging in 2020
For the record, the notion of warming U.S./Iranian relations is predicated on news that U.S. president Donald Trump discussed easing sanctions on the Islamic republic to help secure a meeting with Iranian president Hassan Rouhani later this month.
As for the stockpile draw, while it wasn't as substantial as predicted in the previous session, the drawdowns were still impressive: gasoline stocks fell by 682,000 barrels, slightly less than expected, while crude stocks fell to the lowest in nearly a year.
It had previously been forecast that U.S. crude stockpiles fell 7.23 million barrels, while gasoline supplies declined 4.5 million barrels last week, compared to analytical forecasts of a 3 million barrel contraction.
Meanwhile, those concerned about waning demand for oil would doubtlessly be alarmed by the latest disclosure from energy advisor DNV GL, whose annual report released on Wednesday contended that demand will peak in three years, hold steady until 2030, and decline sharply after that.
Sverre Alvik, head of energy transition outlook for DNV GL, told Reuters that "The main reason for forecasting peak oil demand in the early 2020s is our strong belief in the uptake of electric vehicles, as well as a less bullish belief in the growth of petrochemicals."
By contrast, the more conservative International Energy Agency doesn't expect a peak before 2040, with rising petrochemicals and aviation demand more than offsetting declining oil demand for road transportation.