IEA: Oil prices may fall further in 2016 on excessive supply

MOSCOW, Jan 19 (PRIME) -- Global oil prices may fall further in 2016 on the back of excessive supply, as seen by PRIME in a January report of the International Energy Agency (IEA) released on Tuesday.

“The oil market faces the prospect of a third successive year when supply will exceed demand by 1 million barrels per day and there will be enormous strain on the ability of the oil system to absorb it efficiently,” the agency said. “So the answer to our question (whether oil price may fall further) is an emphatic yes. It could go lower.”

“On what we must struggle to call the bullish side, non-OPEC oil production is projected to fall by 600,000 barrels per day; but this will inevitably be largely offset by higher production from Iran,” the IEA said.

“Nor can we expect other Middle East producers to stay on the sidelines; their regularly stated policy is to protect market share and allow the price to find its level. Saudi Arabia's sharp increase in domestic fuel prices is a sign that OPEC's top producer is preparing for a long period of lower prices.”

In 2015, the oil demand was one of highest in the XXI century, but in early 2016, the market was depressed by dull forecasts of economic growth.

According to data of the World Bank, developing economies faced lowest economic growth since 2001, and the current trends in Brazil, China and Russia show that the situation is unlikely to improve significantly in 2016.

The strengthening of the U.S. dollar will unavoidably put under pressure revenues of other currencies’ holders, so their oil expenses will shrink.

China’s oil demand, which used to be the main trigger of global oil demand growth, is expected to rise by mere 350,000 barrels daily in 2016.

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