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Oil falls as IEA cites North America 'supply shock'

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(GlobalPost/GlobalPost)

Crude prices fell Tuesday after the International Energy Agency said the output boom in North America was sending a "supply shock" across the world.

New York's main contract, WTI light sweet crude for June delivery, dropped 96 cents to close at $94.21 a barrel.

In London trade, Brent North Sea crude for June dipped 22 cents to $102.60 a barrel.

The International Energy Agency fueled bearish sentiment in a report predicting growing crude oil supply through 2018, led by North America, that would outstrip demand.

The IEA raised marginally its outlook for global demand growth in 2013 to 90.6 million barrels per day (bpd).

The IEA hiked its forecast for non-OPEC supply in 2013 by 50,000 barrels to 54.5 million bpd owing to the projected strong output in North America.

"The supply shock created by a surge in North American oil production will be as transformative to the market over the next five years as was the rise of Chinese demand over the last 15," the IEA said.

"North America has set off a supply shock that is sending ripples throughout the world," said IEA Executive Director Maria van der Hoeven while presenting the agency's five-year outlook for the oil market.

"The world will remain well supplied... and price volatility will come from macro events or geopolitical concerns where any price spike will be temporary, given the supply cushion," said Andrey Kryuchenkov, an analyst at Russian financial group VTB Capital.

"Whichever way you look at it -- it is an energy revolution and even though many will doubt it can be replicated outside North America, it proves that higher prices triggered a boost to capacity that will continue to outpace slack post-crisis demand growth," he told AFP.

Crude futures had fallen Monday on fresh signs of economic weakness in China -- the world's largest energy consumer, and also remained under pressure by brimming US stockpiles, which rose to a record level last week.

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http://www.globalpost.com/dispatch/news/afp/130514/oil-falls-iea-cites-north-america-supply-shock