Crude Falls as IEA Forecasts More North American Output

West Texas Intermediate fell as the International Energy Agency forecast that rising production in North America will help increase non-OPEC output by the most since the 1970s.

The U.S. benchmark capped a fourth loss in five weeks. Producers outside the Organization of Petroleum Exporting Countries will raise 2014 output by a near-record 1.7 million barrels a day, led by the U.S., Canada and Kazakhstan, the IEA said in a monthly market report. Brent fell less than WTI as the IEA cited supply losses in OPEC members Libya and Iraq, widening the spread to WTI for the sixth time in seven days.

“There is a bit of supply overhang, the IEA report citing in particular the extraordinary growth in U.S. domestic output,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “It’s definitely a bearish element for the market right now.”

WTI for November delivery slid 99 cents, or 1 percent, to settle at $102.02 a barrel on the New York Mercantile Exchange. Prices declined 1.8 percent this week. The volume of all futures traded was 35 percent above the 100-day average at 2:34 p.m. November futures ended 4 cents below the December contract. WTI’s first-month contract had been trading above the second month since Sept. 23.

Brent for November settlement dropped 52 cents, or 0.5 percent, to end the day at $111.28 a barrel on the London-based ICE Futures Europe exchange. Volume was 7.7 percent above the 100-day average. The European benchmark crude’s premium to WTI widened to $9.26, the most in four months, after reaching $10.01 in intraday trading.

IEA Forecast

The Paris-based IEA boosted its forecast for non-OPEC production by 300,000 barrels a day from last month’s estimate. Output will reach 56.4 million next year, it said.

The agency trimmed its forecast for global oil demand growth in 2014. World fuel consumption will increase by 1.1 million barrels, or 1.2 percent, to 92 million barrels a day. The expansion in consumption is about 100,000 barrels a day less than the IEA forecast last month.

U.S. crude production increased to a 24-year high of 7.83 million barrels a day in the week ended Sept. 13, according to the Energy Information Administration.

“There are expectations that production in the U.S. is going to continue to grow,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Supply is more than ample and that’s kind of weighing on the market. The Brent-WTI spread is blowing out.”

OPEC Output

OPEC output slumped by 645,000 barrels a day in September to less than 30 million a day for the first time in almost two years as labor unrest crippled Libya’s export facilities and Iraq conducted maintenance at its southern oil terminal, the agency said. Saudi Arabia, the organization’s largest member and de facto leader, maintained output above 10 million barrels a day for a third consecutive month, according to the report.

Widespread protests in Libya cut the country’s September production by an average of 1.2 million barrels a day, the EIA said in a monthly report on Oct. 8. Output fell to 300,000 barrels a day last month, the least since the same month in 2011, according to a Bloomberg survey of analysts and producers.

The U.S. benchmark may advance next week on optimism that U.S. lawmakers will reach an agreement to temporarily lift the debt ceiling, according to a Bloomberg survey.

Shutdown Negotiations

House Republicans offered a plan to raise the debt limit and end a partial government shutdown that would require the president to accept policy conditions attached to a spending measure, said two congressional aides. President Barack Obama has insisted that he won’t accept conditions for ending the shutdown, which is in its 11th day.

The EIA said today it will cease operations and furlough staff at the end of today, stopping publications including the weekly petroleum inventory report.

“Even though we are not getting the EIA numbers next week, I think the trend is that we are building inventories,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors.

Implied volatility for at-the-money WTI options expiring in December was 20.3 percent, little changed from 20.2 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 717,601 contracts as of 2:40 p.m. It totaled 764,384 contracts yesterday, 30 percent above the three-month average. Open interest was 1.85 million contracts.

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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