The International Energy Agency said on Tuesday that oil price could keep falling as the global oil surplus will be bigger than estimated while the demand growth slows.
The gap between supply and consumption will become bigger in 2016. IEA said that supply might exceed consumption by an average of 1.75 million barrels a day in the period, compared with an estimate of 1.5 million last month. IEA also said that Iran raised production in January after European sanctions were lifted while Organization of the Petroleum Exporting Countries fail to agree to cut production. The Agency said that there were an additional 280,000 barrels a day last month.
“With the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term,” the Paris-based adviser to 29 nations said in its monthly market report. “In these conditions the short term risk to the downside has increased."
Iran boosted its output by 80,000 barrels a day to 2.99 million in January after European sanctions were lifted. The IEA expected Iran would continued to expand production in the future as Iranian officials say 500,000 barrels of new oil would be sent to the market in the next few months. Saudi Arabia, OPEC’s biggest member, also boosted production by 70,000 barrels a day to 10.21 million.
While the supply is increasing, the demand decreases. The IEA expected that the global oil demand for last year and 2016 would be lower, by 100,000 barrels a day, leaving the level of growth for this year unchanged at 1.2 million barrels a day to average 95.6 million a day.