IEA says global oil demand growth to hit 1.2mln bpd

Brent crude futures, the global benchmark, traded up $1.09 (U.S.), or 3.8 per cent, at $29.64 a barrel at 1028 GMT. Oil Supplies Brent for March settlement lost as much as 72 cents, or 2.5 per cent, to $28.04 a barrel on the London-based ICE Futures Europe exchange.

The market could see a third successive year when supply will exceed demand by 1 million bpd and there will be “enormous strain on the ability of the oil system to absorb it efficiently”, it said.

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.

“Can it go any lower?” the IEA asked.

He said weaker demand in the Middle East, which has been hit by lower oil prices, could add fuel to the sell-off and there was little to stop crude falling to $20 per barrel. On Monday Brent crude touched its lowest level since 2003.

Oil is down 23 percent this year amid volatility in Chinese markets and speculation the removal of restrictions that capped Iran’s oil sales will help to prolong a global glut.

He said Iran plans to increase oil production by 500,000 barrels a day. He added that a “very broad-based sell-off across assets and across the world” would amplify pressure on oil prices.

“Before large volume exports can begin, Iran will have to set up new oil sales contracts above those already in place”, BMI Research said in a market commentary.

By December, according to the IEA’s forecasts, growth had eased to 0.6 million barrels per day, with lower non-OPEC production pegged below year-earlier levels for the first time since September 2012.

Oil producers worldwide are pumping one million to two million barrels of more crude every day than required, creating huge stockpiles.

The 2016 estimates were trimmed by IEA for demand worldwide for oil as the economic expansion in China weakens and the increased forecasts for supply outside the OPEC. The investors are caught amidst a slump in price and an oil supply glut that’s taking a toll on the oil prices globally.

Higher prices aren’t likely through at least the first half of the year, a consensus view held by several analysts.