Indications from the International Energy Agency that the oil market is brushing up against a ceiling sent crude oil prices sharply lower early Thursday.

Traders are watching the balance between supply and demand closely as a market tilted heavily toward the supply side last year sent crude oil prices below $30 per barrel. The Organization of Petroleum Exporting Countries started a move to balance the market in January and called on U.S. shale oil producers to do their part earlier this week.

The International Energy Agency said in its monthly market report for October that, for 2018, three out of the four quarters will show a market more or less in balance, assuming OPEC output stays the same and there are no major unforeseen disruptions.

"However, our current numbers for first quarter 2018 imply a stock build of up to 800,000 barrels per day," the report read. "Taking 2018 as a whole, oil demand and non-OPEC production will grow by roughly the same volume and it is this current outlook that might act as the ceiling for aspirations of higher oil prices."

That erased some of the optimism apparent after OPEC's balance sentiment in its own market report, published Wednesday. The price for Brent crude oil was lower than yesterday's close by 0.86 percent, dropping to $56.45 per barrel at 9:04 a.m. EDT. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 1.3 percent to $50.68 per barrel.

For 2017, the IEA said each quarter so far showed a decline in global crude oil inventories, apart from a small build in the first quarter. Since January, the five-year average surplus for crude oil inventories for the world's advanced economies is lower by about 45 percent, which offsets some of the gains seen in China, the second-largest economy in the world.

Higher demand and lower production, including forecasts for U.S. shale oil, added support to crude oil prices in September. The IEA said enthusiasm, however, has likely peaked and markets last month may have been overheated in general.

Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in an emailed market report, said he viewed the IEA's report as overly bearish.

"Yet, in fairness to market weakness, we did see a somewhat bearish American Petroleum Institute," he said. "They reported crude [oil inventories] up 3.097 million barrels [and] gasoline down 1.575 million barrels."

That would indicate a short-term pivot toward the supply side.

Elsewhere, the U.S. Labor Department reported the four-week moving average for first-time claims for unemployment dropped 9,500 from last week, though data are still influenced by the impacts from Hurricanes Harvey, Irma and Maria. Claims for federal civilian employees and newly discharged veterans both moved up from last week.

The International Monetary Fund this week raised its forecast for global growth, but noted wage growth is slower than during the so-called Great Recession.

Oil prices will likely react to data on supply and demand released later Thursday morning from the U.S. Energy Information Administration.

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