Oil prices fall on renewed oversupply worries

According to the report, Africa's oil supply is projected to average 2.12 million bpd in 2016.

The lower than expected build will underpin near-term sentiment, although over-supply concerns will continue to be an important feature.

These developments are just ahead of the planned informal oil talks in Algiers, Algeria, on September 26 and 27, fueling speculation that producers might actually be able to agree on something. And output averaged 10.36 million barrels a day from January to August, up 200 kilobarrels a day from the prior year.

Global oil demand is now expected to grow by 1.3 million barrels per day (mb/d) in 2016, to 96.1 mb/d, from its original forecast of 1.4 mb/d growth.

The slowdown is expected to continue into 2017, when demand will shrink again to 1.2 million barrels a day.

The IEA's comments followed a surprisingly bearish outlook from the Organization of the Petroleum Exporting Countries on Monday that also pointed to a larger surplus next year.

Part of the reason for excess oil flooding the market stems from the fact that Saudi Arabia and Iran have each raised their oil output by more than 1 million barrels per day since late 2014. Overall OPEC supply stood 930 kb/d above a year ago.

The organization, which represents 29 major oil-importing nations including the USA, also noted that supplies from the OPEC oil cartel are running at near-record levels as Kuwait and the United Arab Emirates pump at their highest levels ever.

"Crude oil output increased mainly from Saudi Arabia and Iran, while Nigeria and Libya showed the largest drop", the 14-member oil cartel said in the report. "If we do see an agreement and will hold then prepare for something stronger", Urquhart Stewart added. Exxon Mobil shares also moved lower. The increase by Iran, which has been recovering from years of economic sanctions following the worldwide agreement limiting its nuclear program, has been swifter than the IEA expected.

The report prompted Eugen Weinberg, head of commodities strategy for Commerzbank, to remark, "It seems the situation has deteriorated strongly in the eyes of OPEC as well as the IEA. that we are in the third quarter of 2016 and we won't see the "balancing-out" over the next six months is definitely a major change".

In other recent oil news, Saudi Arabia and Russian Federation agreed at the G-20 summit in China last week to cooperate on oil and create a "working group" to stabilize markets.

The Organization of the Petroleum Exporting Countries, led by Saudi Arabia and other big Middle East crude exporters, will meet non-OPEC producers led by Russian Federation at informal talks in Algeria between September 26 and 28.

Crude prices tumbled on Tuesday after the International Energy Agency (IEA) said slowing oil demand growth amid growing inventories and supplies could signal that the market will be oversupplied at least through the first half of 2017.

Still, the report was enough to rattle oil markets.

U.S. West Texas Intermediate crude fell $1.25, or 2.7 percent, to $45.04.

North Sea Brent for November delivery lost US$1.22, sinking to US$47.10 per barrel on the Intercontinental Exchange in London.

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