IEA says global oil glut will worsen in early 2016

Crude oil prices might head lower over the next few months as Iraq and Iran boost their output even in the face of slower growth in demand and offset decreased supplies from outside the cartel of oil producing nations, the rich world’s oil watchdog said on Tuesday.

Excess supplies might reach 1.75m barrels per day in the first half of 2016, 250,000 barrels more than the International Energy Agency predicted in January.

“With the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term. In these conditions the short term risk to the downside has increased," the IEA said in its monthly oil market report.

Neither did the IEA believe that co-ordinated cuts were likely.

Oil output from the Organisation for Petroleum Exporting Countries’ 13 members jumped by 280,000 barrels per day in January to reach 32.63m, surpassing the so-called ‘call on OPEC’ – the amount of production required to stabilise the market- by 900,000 barrels per day.

Iran increased its production by 80,000 barrels per day in January to 2.99m, Iraq by 50,000 barrels to 4.35m and Saudi Arabia by another 70,000 to reach 10.21m, the IEA said.

In parallel, the rates of growth in global oil demand growth for 2015 and 2016 were lowered by 100,000 barrels per day, with this year’s increase pegged at 1.2m barrels to reach 95.6m barrels a day.

That would mark a slowdown from the five-year peak of 1.6m b/d reached in 2015, as the economies of China, Europe and the US slowed down.

Supplies from outside OPEC fell by 500,000 barrels a day last month, the IEA said in its monthly oil market report, foreshadowing the 600,000 decline in non-OPEC production forecast for 2016.

The fall in output is “taking an awful long time to happen,” the IEA said.