CALGARY — World oil prices leaped as much as 5 per cent after the West’s energy-security watchdog cut its forecast for growth of U.S. shale production, adding to speculation that crude markets had found a bottom despite lingering fears of massive oversupply.
The International Energy Agency said in its medium-term oil market report on Monday that a 70-per-cent drop in drilling activity since 2014 in North Dakota and Texas prompted it to slash its outlook for shale growth for this year and 2017.
But it said an “enormous” accumulation of global crude stockpiles would keep pressure on prices for at least another year, and that a short-term recovery is unlikely without deeper production cuts outside the Organization of Petroleum Exporting Countries.
Several analysts said Monday’s gains were overdone.
“I’m somewhat puzzled by the bullish response, particularly with respect to prices over this year and next, because the IEA’s medium-term report essentially reiterates a view that most folks have come to embrace, albeit reluctantly,” said Judith Dwarkin, chief economist at RS Energy Group in Calgary.
“And that’s that for this year and most of next year; we’re going to have a vastly oversupplied market.”
Brent crude finished Monday up 5 per cent, or $1.68 (U.S.) at $34.69 a barrel. West Texas intermediate oil for future delivery spiked 6 per cent, or $1.84 to $31.48 a barrel after climbing above $32 earlier in the session.
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