Oil slips below $57 as IEA predicts growing glut

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LONDON (March 13) - Oil fell below $57 a barrel on Friday after the International Energy Agency said that a global oil glut is building and U.S. oil production shows no signs of slowing.

The IEA, which advises industrialised countries, said in its monthly report that the United States may soon run out of empty tanks to store crude, which would put additional downward pressure on prices.

Brent crude was down 45 cents at $56.63 by 1141 GMT. U.S. crude fell by 92 cents to $46.13.

"U.S. supply so far shows precious little sign of slowing down," the IEA said. "Quite to the contrary, it continues to defy expectations."

While OPEC output declined in February, global supply was up by 1.3 million barrels per day (bpd) year on year at 94 million bpd, led by a 1.4 million bpd non-OPEC increase, the IEA said.

"The market will be more balanced in the second half, but there is still massive oversupply in the first half," said Barbara Lambrecht, an analyst at Commerzbank in Frankfurt.

"We still expect oil prices to fall in the coming weeks due to rising inventories."

News of a deal to end a strike by U.S. refinery workers provided some support because it could help to increase demand for crude for processing in the world's biggest oil consumer, reducing U.S. stockpiles that climbed last week to the highest level for this time of year in more than 80 years.

Still, forecasts of a tighter market to come may have to be revised should Iran and six world powers reach a deal over its nuclear programme and lift sanctions that have limited Iranian oil exports. The aim is to reach a framework nuclear agreement by the end of March and full agreement by June 30.

"A question mark for the second half remains Iran, and the answer to that is expected to come in over the next two weeks," Petromatrix analyst Olivier Jakob said.

Investors also kept an eye on Libya, where fighting has slowed output. Production has varied between 410,000 bpd and 490,000 bpd this week, a senior industry source said, higher than estimates of February supply.