Oil prices still haven’t hit rock bottom, says global Energy Agency

It forecast zero growth in non-OPEC oil supply in 2016 after an increase of 1 million bpd in 2015.

The Organization of the Petroleum Exporting Countries is slated to publish its monthly report on Monday.

It is equally clear that the market’s ability to absorb that oversupply is unlikely to last.

“The upside Iranian risk surrounds the possible removal of sanctions and the additional economic growth and oil product demand that could follow”. “The supply response to lower prices is on the way”, the IEA said, adding it may take another price drop for a full supply response to unfold.

“The industry can be quite resilient at $60” a barrel for the USA benchmark, said consulting firm Wood Mackenzie in a note. The grade has lost 13 per cent from this year’s peak in May.

“The selloff was about China, and the stock market there has started to stabilise so we have started to recover from oversold levels”, said Amrita Sen, chief oil analyst at Energy Aspects.

The 2016 numbers are supportive of prices because of the “huge swing” in the trend of non-Opecproduction growth, she said.

While “cost savings, efficiency gains and producer hedging” have helped shale drillers beat expectations so far, the nation’s boom can’t keep going at current prices, the agency said.

World oil demand growth appears to have peaked in the first quarter at 1.8 mb/d and will continue to ease throughout the rest of 2015 and into 2016 as temporary support fades.

“And the group is not slowing down”, the IEA said.

OPEC crude supply rose by 340 kb/d in June to 31.7 mb/d, a three- year high, led by record high output from Iraq, Saudi Arabia, and the United Arab Emirates.

That leaves total Opecsupplies about 1.4 million barrels a day higher than the average needed next year “and the group is not slowing down”, according to the IEA.

But the IEA, which advises the world’s biggest economies on energy policy, says this mini golden era will soon end.

Oil prices were barely changed Friday as the worldwide Energy Agency forecast that global demand will grow more slowly next year. “Recent developments suggest that the process will extend well into 2016, as shown in our quarterly supply/demand balances for that year”.