Darren Kugler
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Oil hits 2-year low as IEA cuts demand forecast

Brent, gasoline futures settle at 4-year low

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Oil prices continued to slide on Tuesday, though strategists said the selloff may be overdone

The collapse in crude-oil prices continued Tuesday, with the U.S. benchmark hitting its lowest level since June 2012. The sharp slide occurred after the International Energy Agency cut its forecast for oil demand growth to its weakest in five years.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November CLX4, +0.40% fell $3.90, or 4.6%, to settle at $81.84 a barrel.

That was oil’s lowest settlement since June 28, 2012. It was also the largest one-day percentage and dollar decline since November 2012.

November Brent crude LCOX4, +0.36% the global benchmark, dropped $3.85, or 4.3%, to end at $85.04 a barrel on London’s ICE Futures exchange. That was Brent’s lowest settlement since November 2010.

In its monthly report released Tuesday, the Paris-based IEA said it expects oil demand this year to rise by 700,000 barrels a day, down from its previous estimate of 900,000 barrels a day.

At the same time, oil production rose by almost 910,000 barrels a day last month, according to IEA figures, boosted by rising production by the Organization of the Petroleum Exporting Countries, or OPEC, and non-OPEC producers alike.

Market participants argued, however, the recent selloff is at or approaching overdone levels and has been much steeper than warranted by weak demand and supply fundamentals.

“The large downward move in oil over the past two weeks was mostly speculative, in our view. While the market remains oversupplied and lower OPEC production should be required, we see few signs of new deterioration in fundamentals,” Morgan Stanley analyst Adam Longson said in a report.

Oil markets are looking to the OPEC meeting in November for cues on oil supply levels, and recent price cuts by OPEC oil producers have driven some of the speculation regarding production levels.

Elsewhere in energy trading, gasoline for November delivery RBX4, +0.15% fell 7.51 cents, or 3.3%, to settle at $2.1802 a gallon on Nymex. That was the lowest settlement for gasoline futures since November 2010.

Heating oil also for November HOX4, +0.32% declined 8.46 cents, or 3.3%, to end at $2.4722 a gallon on Nymex, hitting its lowest since December 2010.

November natural gas NGX14, +0.71% fell 10 cents, or 2.6%, to end at $3.8160 per million British thermal units on Nymex. That was the lowest settlement for natural gas since September 23.