Oil prices plunged more than $2 per barrel on Wednesday (November 12th), weighed down by an OPEC report stating that global oil supply will match demand in 2026, marking a further shift from its previous projection of a supply deficit.

Brent crude futures closed at $62.71 per barrel, down $2.45, or 3.76%, after rising 1.7% on Tuesday. U.S. West Texas Intermediate crude closed at $58.49 per barrel, down $2.55, or 4.18%, after rising 1.5% in the previous session.

The Organization of the Petroleum Exporting Countries (OPEC) noted that global oil supply will match demand next year due to increased production by the broader OPEC+ group. Previously, the IEA projected a supply deficit in 2026.

"The prospect of a balanced market is clearly a factor driving prices lower," said Phil Flynn, senior analyst at Price Futures Group. "The market wants to believe that the market is balanced. I think the market is taking OPEC more seriously than the IEA."

The International Energy Agency (IEA) in its annual World Energy Outlook predicted that oil and gas demand could continue to grow until 2050. This deviates from the IEA's previous expectation that global oil demand would peak this decade, as the international agency shifted away from forecasting methods based on climate pledges.

John Kilduff, a partner at Again Capital, said the OPEC outlook arose because some crude oil sellers were unable to find buyers. "There are cargoes going begging," Kilduff said. "The front-end market is forming a new price curve. There's a general sense of weakness in the US economy."

Analysts have previously noted that a crude oil glut is hampering price gains. OPEC+ agreed this month to delay its production increase in the first quarter of next year, after canceling production cuts in August of this year.

US GOVERNMENT REOPENING

The reopening of the US government could boost consumer confidence and economic activity, boosting demand for crude oil, IG analyst Tony Sycamore wrote in a note.

The Republican-controlled US House of Representatives will vote on Wednesday on a bill, already approved by the Senate, that would restore funding to government agencies through January 30. (alg)

Source: Reuters