The International Energy Agency, which advises industrialized countries on energy policy, said the global oil glut was set to last until at least late 2016 due to unseasonably warm weather and rising supply.
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“We are reducing our oil price estimates in light of continuing oversupply in the global oil markets, with Iran poised to add more than 500,000 barrels per day (bpd) to global supply while demand growth remains tepid”, Moody’s said in a statement.
“While the pace of stock-building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in over-supply”.
USA oil futures crashed below $27 dollars a barrel on Wednesday for the first time since 2003, caught in a broad slump across world financial markets as traders anxious that a huge oversupply in oil was coinciding with an economic slowdown, especially in China.
USA crude settled at $28.46 a barrel, down 96 cents or 3.26 pct, at its lowest level since September 2003. But the sharp drop has battered energy companies, leading to more than 258,000 layoffs in 2015 and expectation of more job cuts and bankruptcies in 2016.
Global oil demand saw a “flip” from a near five year high, or 2.1m bpd, in the third quarter of 2015 to a one year low of 1m bpd by the fourth quarter.
That will lead to “enormous strain” on the system’s ability to absorb the pressure, it said.
An analyst report said Canada’s oil-sands producers were now losing money on every barrel sold, while others warned that United States shale producers “were just burning cash” at current prices.
The lifting of sanctions against Iran was also highlighted as a key impact for oil prices going forward.
“The outlook for the oil market is pretty negative at the moment”, Angus Nicholson, an analyst at IG in Melbourne, said by phone.
He said weaker demand in the Middle East, which had been hit by lower oil prices, could add fuel to the sell-off and there was little to stop crude falling to $20 a barrel.
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Forecasts by the EIA highlight that annual average crude oil production is forecast at 3.1 million barrels per day in 2016 and nearly 3.6 million barrels per day in 2017.
