Oil Falls as Supply Glut Seen Shrinking Slower Than Expected

(Bloomberg) -- Oil fell after a government agency raised its U.S. production forecast through 2017.

Futures fell as much as 1.2 percent in New York after rising to a two-week high Monday. The Energy Information Administration raised its U.S. crude production forecast through 2017 in a monthly short-term energy outlook. While crude and gasoline inventories are forecast to have declined last week, they will remain at the highest seasonal level in at least two decades.

Oil has seesawed since closing in a bear market last week. Though members of the Organization of Petroleum Exporting Countries plan to discuss the market at the International Energy Forum in Algiers, there are no plans to revive talks for an output-freeze after a proposal failed in April, two delegates said last week.

“It’s going to take a lot more time than anyone expected for the market to balance,” said Mark Watkins, the Park City, Utah-based regional investment manager for The Private Client Group of U.S. Bank, which oversees $133 billion in assets. “It will be late this year or even the first half of 2017 before it happens.”

West Texas Intermediate for September delivery fell 38 cents to $42.64 a barrel at 1:20 p.m. on the New York Mercantile Exchange. Brent for October settlement fell 49 cents to $44.90 on the London-based ICE Futures Europe exchange. The global benchmark traded at a $1.54 premium to WTI for October.

U.S. crude stockpiles are forecast to have dropped by 1.5 million barrels, according to a Bloomberg survey before a report from the Energy Information Administration on Wednesday. Supplies unexpectedly rose by 1.4 million barrels through July 29. Gasoline inventories probably fell by 1.3 million barrels last week.

The EIA now sees U.S. production of 8.7 million barrels a day in 2016 and 8.3 million barrels a day in 2017. The agency also downgraded its price forecast, seeing WTI at $41.16 a barrel in 2016 and $51.58 in 2017.

Oil-market news:

Israel has approved 24 new blocks in its economic waters that will be marketed in an international tender process, the Ministry of National Infrastructures, Energy and Water Resources said in an e-mailed statement. The plan comes as the country aims to jump-start its fledgling energy industry and export fuel abroad. China imported about 7.35 million barrels a day last month, the slowest pace since January, according to data from the General Administration of Customs. Iran may lose market share in India as Essar Oil Ltd. expects to cut back purchases from the country following the completion of a deal with OAO Rosneft, according to Lalit Kumar Gupta, the Indian company’s chief executive officer.