IEA says oil market to remain oversupplied until late 2016

But the Organization of the Petroleum Exporting Countries (OPEC), of which Iran is a member, said Monday that it expects a “rebalancing process” as the sharp fall in oil price causes production from non-cartel competitors such as the United States to fall after seven years of “phenomenal” growth.

Iran now produces 2.8 million barrels per day and exports just over one million barrels.

Saudi Outlook Iran will be able to increase oil production by 100,000 barrels a day, or 3.7 percent, a month after sanctions are lifted and by 400,000 in six months, according to the median estimate of 12 analysts and economists surveyed by Bloomberg.

Brent crude futures have fallen to their lowest level since late 2003, tumbling below US$30 a barrel, after OPEC said in December it would not cut output to halt the price slide despite global oversupply.

Analysts forecasts that Iran’s production will increase to 3.2 million barrels per day over the course of the first quarter of 2016, and stay at that level through the Q3 and Q4 of the year.

Marking a 13-year low, the price of the Organisation of Petroleum Exporting Countries (OPEC) basket of twelve crudes stood at $23.58 a barrel on Monday, compared to $24.74 on the previous Friday, said the organisation’s secretariat said.

Prices came under pressure on Tuesday morning as Iran ordered a sharp increase in oil output to take immediate advantage of the lifting of sanctions.

The country is said to have over 10 oil super-tankers loaded and ready to sell into the market.

“You can’t say this was unexpected but the Iran news is an additional factor that’s working against oil prices”, said TD Securities analyst Bart Melek, who also pointed to global oversupply and concerns about demand from China. Opec’s forecast for global oil demand growth this year was tweaked slightly upwards to 1.26 million barrels per day to reach 94.17 mbpd.

Iranian exports had declined with the imposition of sanctions, which were lifted Saturday after the affirmation of the International Atomic Energy Agency (IAEA) that Iran had met its obligations to ensure the strictly peaceful nature of its nuclear program. On Monday, Iran issued an order to raise oil production by 500,000 bpd.

Brent crude was trading 5.39% higher at $30.09 a barrel in London on Tuesday.

Saudi Oil Minister Al-Naimi declined to comment Sunday when asked how the removal of economic sanctions against Iran might affect prices. Iran has the fourth largest proven oil reserves in the world, according to the US Energy Information Administration.

The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, had last week said, “In 2014, the price of oil was $116 per barrel and the cost of production was $25 per barrel”. Lower commodity prices, including oil, partly reflect weakening demand itself.