The worldwide oil markets could start to drown in supply sending the prices per barrel of crude lower as demand growth lessens and Iran increases its production and exportation with an end to its sanctions, said the International Energy Agency.
The 2016 estimates were trimmed by IEA for demand worldwide for oil as the economic expansion in China weakens and the increased forecasts for supply outside the OPEC.
While the supply of non-OPEC oil should drop by as many as 600,000 barrels per day during 2016, the comeback of Iran is likely to replace that before the middle of this year. Because of that, world markets might have a surplus per day of as many as 1.5 million barrels during the first six months of 2016.
The industrialized economies adviser based in Paris said that while the pace of increasing stock in oil eases during the second six months of 2016, as the supply from producers who are non-OPEC drops, unless something is done, the oil market could be oversupplied, pushing prices even lower.
On Monday, oil sank to a low of 12 years at under $28 per barrel as the removal of sanctions against Iran freed the country up to revive its crude exports that will add to the glut.
In addition, Saudi Arabia signaled on Sunday again that is would not end its strategy of preserving its market share even as oil prices crash more. Saudi Arabia is the largest exporter of oil in the world.
Iran will likely be the only source of growth in supply for OPEC in 2016 as an Iraqi surge fizzles out, said the IEA.
The exporter located in the Persian Gulf could add as many as 300,000 barrels per day by the end of March and then 600,000 barrels by the end of June, said the IEA.
Those figures are less than Iran s official ministry plans to add of 1 million before the middle of the year, but it could be sufficient to pressure the price of oil further.