The
oil price is set to fall further this year as supply vastly exceeds
demand, with major oil exporter Iran's return to the market
offsetting any production cuts from other countries, the IEA said
today. "Can it go any lower?" the International Energy
Agency asked in its monthly oil market report. "Unless something
changes, the oil market could drown in over-supply. So the answer to
our question is an emphatic yes. It could go lower." The oil
price this week hit lows not seen in 12 years, and is currently
trading at or below 29 dollars per barrel. Iran's return to the oil
market, a major reason for continued price weakness, has probably not
been fully factored into prices yet, the IEA warned, contradicting
many financial analysts. "Iranian barrels are likely to back out
similar quality sour crude from Saudi Arabia, Iraq and Russia - so
producers are likely to become ever more competitive on the pricing
front," the IEA said. Iran is facing "the not
inconsiderable challenge" of finding buyers willing to take more
oil into an already glutted market, the IEA said. "However, if
Iran can move quickly to offer its oil under attractive terms, there
may be more 'pricing in' to come," it said. Even under the
sanctions regime, Tehran did everything it could to ensure the
country's oil sector is prepared for higher output as it strives to
reclaim its spot as OPEC's second biggest producer after Saudi
Arabia, a post now occupied by neighbouring Iraq, the IEA added.
Iran's projected 600,000 barrels per day (bpd) production boost
following the end of sanctions will offset production cuts from
non-OPEC producers which are also estimated at 600,000 bpd. These
production cuts are the only "bullish side" for the oil
market, the IEA said, with most other factors conspiring to keep the
oil price under pressure. Growth in world demand for oil, which rose
more than most years this century in 2015 before being drowned in
over-supply, is expected to ease off. Worldwide demand for oil is now
expected to rise by 1.3 percent in 2016 to 95.7 million barrels of
oil, a sharp slowdown after a 1.8 percent increase in 2015.
Tuesday, January 19, 2016
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