(Update after market close)
By David Gaffen
NEW YORK, Nov 17 (Reuters) – Oil prices tumbled on Wednesday, pushing benchmark contracts to their lowest closing levels since early October, after OPEC and the International Energy Agency warned on an imminent excess supply and that the increase in COVID-19 cases in Europe increased the risks for the recovery of demand.
* Brent crude futures closed down $ 2.15, or 2.61%, at $ 80.28 a barrel. US West Texas Intermediate (WTI) crude futures closed at $ 78.36, down $ 2.40 or 2.97%.
* The declines brought Brent to its lowest close since Oct. 1 and US crude to its lowest close since Oct. 7. Traders said recent market movement suggests the funds are considering a greater likelihood of supply starting to outstrip demand in the coming months.
* “It signals a move toward equilibrium that we haven’t seen in many months,” said Tony Headrick, energy analyst at CHS Hedging.
* The global oil market has focused on rapidly increasing demand in the face of a slow increase in supply from the Organization of the Petroleum Exporting Countries and its allies, coupled with the reluctance of large U.S. shale producers to spend more on drilling.
* However, both the IEA and OPEC said in the last week that more supply could arrive in the coming months. OPEC and its allies, known as OPEC +, have maintained an agreement to boost production by 400,000 bpd each month so as not to overwhelm the market with supply.
* On Tuesday, OPEC Secretary General Mohammad Barkindo said the group sees signs of a surplus oil supply starting next month, adding that its members and allies will have to be “very, very cautious.”
* Other nations, including the United States, have asked OPEC + to boost production more quickly. The United States has considered announcing an emergency release of crude from its strategic oil reserve, which contains more than 600 million barrels.
(Additional reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; edited in Spanish by Rodrigo Charme)