IEA Said World Risks Drowning in Oil

Tehran complied with a nuclear deal which led the United States and other key powers to decide revoking global sanctions which had trimmed oil exports from Iran by nearly two million barrels a day.

“The price remains to the downside as we continue to sort out the oversupply and Iran returns to the market”, Kilduff said.

Increased supply of oil from Iran and concerns over demand growth in countries like India and China will drive oil prices yet lower in 2016 as output vastly exceeds consumption, Moody’s Investors Service has said.

And this could send the already depressed price of oil even lower.

The price drop has started to slow the development of relatively expensive supply sources, such as USA shale oil, and forced companies to delay or cancel billions of dollars worth of projects, putting some future supplies at risk.

US crude futures were up 34 cents at $29.76 a barrel, maintaining their unusual premium over Brent.

Global oil demand flipped from a five-year high in the third quarter at 2.1 million b/d to a one-year low in the fourth quarter of 1.0 million b/d, which does not bode well as new Iranian output overcomes declines in USA production, the International Energy Agency (IEA) said Tuesday.

USA oil price plummeted below 27 US dollars a barrel Wednesday as the market continued to be bewildered by a supple glut amid fears about the pace of global growth. “There are considerable uncertainties around the quality and quantity of oil that Iran can offer to the market in the short term and the not inconsiderable challenge of finding buyers willing to take more oil into an already glutted market”, the IEA argues. Since January, the prospect of the lifting of the sanctions on Iran accelerated the rout.

Data from the American Petroleum Institute late Wednesday also showed that USA oil inventories grew by 4.6 million barrels last week, well above a Platts survey’s forecast for a gain of 2.9 million, sending oil even lower in late trade.

The prices that oil saw this week are the lowest to be seen in the last 12 years.

It said Europe is expected to be the initial target for Iranian oil exports but noted that Iran “will have to offer incentives and ensure sufficient transparency in its domestic banking sector to lure back European buyers”.