October 14, 2014 / 5:36 AM / 5 years ago

REFILE-UPDATE 8-Oil rout unrelenting, hits $86 on dim demand view, rising shale

(Corrects to Tuesday in the first paragraph)

* IEA cuts global oil demand estimates for 2014 and 2015

* Estimate for demand for OPEC crude cut by 200,000 bpd

* Reuters survey points to rise in U.S. crude stocks last week

* EIA sees rising shale oil output in Nov, adding over 100,000 bpd

By Jessica Resnick-Ault

NEW YORK, Oct 14 (Reuters) - Oil prices plunged nearly $3 a barrel on Tuesday, on track for the biggest one-day slide in over a year after the West’s energy watchdog cut its estimates for oil demand and U.S. forecasts projected another big bump in shale production.

Adding to the bearish tone on Tuesday, a source familiar with oil policy in Iran, normally one of the first in OPEC to call for production cuts, followed Kuwait in saying there was no need to rein in supplies.

Brent crude for November, which expires on Thursday, fell $2.65 a barrel to $86.24 after briefly dipping below $86 a barrel, its lowest since December 2010.

U.S. crude fell $2.68 a barrel to $83.06 after it pared sharp intraday losses on Monday to settle down 8 cents.

Losses deepened in mid-afternoon after the U.S. Energy Information Administration projected that fast growing shale basins would increase output by some 106,000 bpd in November from a month earlier.

The unrelenting rise in U.S. shale is colliding with a diminishing outlook for consumption, leading to a glut of crude that has knocked Brent more than 25 percent lower since June.

The International Energy Agency, which advises industrialized countries on energy policy, cut its estimates for global oil demand growth by 250,000 barrels per day for this year and by 90,000 bpd for 2015. It said demand for OPEC oil would be 200,000 bpd lower for both years.

With OPEC powerhouse Saudi Arabia intent on protecting market share, rather than slowing the price slide, many analysts saw little to prevent a deeper rout.

“Recent price drops appear both supply and demand driven,” the IEA said in its monthly oil market report. “Further oil price drops would likely be needed for supply to take a hit - or for demand growth to get a lift.”

The heavily traded Brent/WTI spread was volatile over the day, first narrowing to under $2 a barrel, near its lowest in over a year, before widening back out to $3.30 later in the day as U.S. oil futures deepened losses.


The IEA’s supply forecast is “piling on” already weak economic data from Europe, said analyst Phil Flynn of Prices Futures Group in Chicago. “Numbers out of Europe show deflationary pressures are extending even into the UK.”

Germany’s economy could shrink in the third quarter, but any recession, as defined by two or more consecutive quarters of declining output, should not last long, the chief economist of think tank ZEW said on Tuesday.

Investors were looking ahead to weekly U.S. data on oil and product inventories for price direction.

U.S. commercial crude stocks likely rose last week, while refined products likely fell, according to a Reuters survey ahead of the inventory reports due out on Wednesday and Thursday, a day later than usual due to a holiday. (Additional reporting by Florence Tan, Christopher Johnson and David Sheppard; Editing by Jason Neely, Lisa Von Ahn, Paul Simao and Chizu Nomiyama)

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