Oil prices to fall further in oversupplied market, says IEA

The crude oil market is expected to remain oversupplied until at least late this year, amid rising supply and unseasonably warm weather, the International Energy Agency said in its monthly report.

The IEA said oil prices will fall further as supply exceeds demand, while Iran’s return to the market is unlikely to be balanced out by production cuts from other countries.

"Can it go any lower?" the agency asked.

"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."

Iran’s deputy oil minister, Roknoddin Javadi said on Monday that the country has ordered the production of an additional 500,000 barrels of oil per day following the lifting of sanctions on 16 January.

“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,” said the IEA.

The agency reduced its forecast for 2016 OPEC crude oil demand by 300,000 barrels of oil per day to 31.7m bpd.

"We conclude that the oil market faces the prospect of a third successive year when supply will exceed demand by 1m bpd and there will be enormous strain on the ability of the oil system to absorb it efficiently."