oil market drops on iea price warning

London: World oil prices sank Friday after the International Energy Agency warned over the price outlook amid bulging global supplies.In midday London deals, European benchmark Brent North Sea crude for April delivery fell 57 cents to $56.51 a barrel.US benchmark West Texas Intermediate (WTI) for April shed 72 cents to $46.33 a barrel.”Crude oil prices extended losses … as investors remained cautious following the bearish IEA oil monthly report, high levels of crude oil inventories and the strong US dollar rally,” said Sucden analyst Myrto Sokou.The Paris-based IEA energy watchdog warned Friday that the recent rebound in oil prices was built on flimsy foundations.Prices collapsed by 60 percent to about $40 between June and late January due to global oil oversupply, a weak world economy and the strong dollar.However, the market has since rebounded somewhat following a slowdown in US oil-drilling activities.”Behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly,” said the Paris-based IEA, which advises energy consuming nations.It noted that a key driver in the recovery in oil prices has been drops in the number of rigs drilling for shale oil in the United States.”Yet US supply so far shows precious little sign of slowing down. Quite to the contrary, it continues to defy expectations,” said the IEA in its monthly report, which sharply revised up output estimates for the end of last year and forecasts for the start of 2015.The IEA hiked its demand forecasts for every quarter this year, with the annual 2015 figure bumped up by 100,000 barrels per day to 93.5 mbpd, compared with its previous forecast given last month.In earlier Asian trading, the oil market had risen on news of a deal to end a strike at US refineries.Crude futures had fallen Thursday after a government report showed surging US stockpiles, adding to a global oversupply.The US Department of Energy on Wednesday said inventories hit a fresh record high of 448.9 million barrels last week, while stockpiles at the Cushing terminal hub in Oklahoma — the price settlement point for WTI — also increased.Bloomberg News meanwhile reported the United Steelworkers union representing 30,000 US oil workers had reached a tentative deal on a four-year contract with Royal Dutch Shell that could see a mass walkout brought to a close.Another development affecting the market was an announcement on Monday by the US Energy Information Administration raising its crude production forecast this year to 9.35 million barrels per day from 9.30 million. (AFP)