Oil prices recover from sharp selloff, more volatility expected

Supply may exceed consumption by an average of 1.75 million barrels a day in the period, compared with an estimate of 1.5 million last month, and the excess could swell if OPEC adds more output, the IEA said.

In parallel, the rates of growth in global oil demand growth for 2015 and 2016 were lowered by 100,000 barrels per day, with this year’s increase pegged at 1.2m barrels to reach 95.6m barrels a day.

Inventories at the Cushing, Oklahoma delivery point for U.S. crude futures rose to an all-time high just shy of 65 million barrels, data from the government’s Energy Information Administration (EIA) showed on Wednesday.

IEA demand expectations dragged on oil prices early in the trading day in NY. Crude oil remained below the $28 price level keeping stress on the global markets. On top of that, Iran has increased its output by 60,000 barrels a day in the last month and is looking to grow output by 500,000 barrels a day in the coming months.

We’ve seen some epic swings in crude oil prices to start 2016.

US oil price retreated Wednesday as data showed the oil production of the country fell less-than-expected. It predicts that, after hitting a five-year high in 2015, oil demand growth will “ease back considerably” in 2016.

Another widely held view in the market is that increases will slow in OPEC production, except for Iran which is returning to the market after years of global sanctions, the IEA said.

But it pointed out that Iraqi production struck a new record in January and that there are indications Saudi Arabia has stepped up shipments. Russia’s largest oil producer Rosneft OJSC said it will defend traditional markets and expressed doubts over any coordinated action to reduce output.

Canadian stocks fell for the third consecutive day on Wednesday as oil dropped to a three-week low in NY amid speculation that an unexpected decline in crude inventories is only temporary, with more gains to follow as production remains strong. Volatility is set to “spike” as prices seek an equilibrium, which could drag oil below $20 a barrel, Goldman Sachs said.