Cheap oil to hit rival supply harder in 2016

Those prices could jeopardize the world’s oil storage capacity, but the IEA report also said that reserves should grow more slowly next year as low prices curb non-OPEC production.

Organization for Petroleum Export Countries, in its effort to protect market share and competing with other producers, has raised Crude Oil output to peak in more than three years.

“In particular, we see potential for a temporary undershoot by prices to 2008 financial crisis lows around $36 per barrel for Brent”, BMI said on Thursday. The trigger was a meeting of oil producers’ cartel Opec late last week, which broke up in disarray as the member countries failed to agree to put a lid on production.

However, Sanjeev Gupta, who heads the Asia Pacific oil and gas practice at professional services firm EY, said: “The market remains weak overall due to global oversupply, compounded by the OPEC’s decision to leave its production quota unchanged”.

U.S. shale oil production, the main driver of non-OPEC supply growth, is expected to fall for a ninth consecutive month in January, a forecast from the U.S. Energy Information Administration showed this week.

“We believe that the current crude oversupply in the global market will persist over the coming years, reinforcing our flat outlook for oil prices over 2015-2017”, BMI Research said in a market commentary.

The agency admits the Saudi-led policy of dumping oil and cutting prices seems to be working, taking a toll on non-OPEC supply.

The U.S. West Texas Intermediate (WTI) crude finished the session down 35 cents at $37.16. “No, you can’t”, he said, although adding that prices would not likely fall that far.

It said its group output rose by 230,000 bpd in November to 31.7 million bpd.

Brent crude closed on Wednesday down 15 cents at $40.11 a barrel, after hitting a near seven-year low at $39.57.

Meanwhile, oil output in the United States, a strong competitor of OPEC, could continue to decline in 2016 possibly causing oil prices to rise in the second half of that year, he stated.