Forecast Says Oil Price Could Fall Amid Weak Demand

Prices slid 7.4% for the week.

The bottom may still lie ahead, as the market remains “massively oversupplied”, the global Energy Agency said Friday.

That compares with an average of 1.4 million barrels a day this year.

Crude oil futures traded largely steady on Friday after data showed the USA oil rig count barely rose this week, allaying fears of an acceleration in drilling that could bring on a surfeit of new supply to the market. In its first forecast for next year, the IEA, which advises industrialized nations on their energy policies, said global oil-demand growth is forecast to slow to 1.2 million barrels a day in 2016.

The IEA notes that a slowdown in demand this year comes as supplies from the Middle East, Russian Federation and the USA are at or near a peak.

“The rebalancing that began when oil markets set off on an initial 60% price drop a year ago has yet to run its course”, the Paris-based agency said in its report.

Core members of the Organization of the Petroleum Exporting Countries have been pumping strongly for most of the previous year in an attempt to regain market share. But the supply growth is slowing.

“Given the oversupply that we still have in the market, it will be hard for oil to rally”, said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Conn. “Fundamentally we may test the $50 area next week”.

Brent futures quickly reversed gains made earlier in the day on expectations of a decline in USA inventories and the failure so far of Iranian nuclear talks to produce a deal.

‪”If Greece were to exit the eurozone, it could lead to depressed demand there and throughout Europe, the IEA said”.

Kloza thinks what’s happening to prices now – wild swings in crude prices that are a major factor in the price at the pumps and daily changes at the pumps – are a “dress rehearsal” for the fall when consumer demand drops markedly.