World Bank slashes 2016 oil price forecast

USA crude supplies probably rose by 4.1 million barrels last week, a Bloomberg survey showed before an Energy Information Administration report.

“The oversupply will keep markets depressed and prices low, and on the other hand short positions are in excessive territory”, Cleef said.

Al-Badri also said OPEC and non-OPEC producers needed to work together to tackle oversupply in order to prop up oil prices. “The market needs to see inventories come down to levels that allow prices to recover and investments to return”, Mr El Badri said.

Oil is down about 16 percent this year as volatility in global markets adds to concern over ample USA stockpiles, unfettered Saudi and Russian output and an expected revival in Iranian shipments after the end of sanctions.

Oil prices, which were trading higher than $115 a barrel about 2 year ago, recently slipped to sub $30 levels.

Credit Suisse has become the latest big bank to slash its oil price forecasts, to the tune of around $10 per barrel for 2016 and 2017, on high inventories and slower demand growth. Many investors have lost the stomach for the market after a wild ride since last summer, when shares crashed 40 per cent. Beijing intervened to stem that rout and orchestrate a recovery of sorts, but anyone who mistook that for a bottom and bought in will have lost their shirt again in January.

“Low prices for oil and commodities are likely to be with us for some time“, World Bank senior economist John Baffes said in a statement accompanying the report. Iran said it plans to export 2 million b/d of oil within the next six months.

Iraq’s oil ministry told Reuters that the country reached record output in December, with its fields in the central and southern regions producing as much as 4.13 million barrels a day.

“However, rising USA crude stockpiles are likely to remain a headwind in the near term”.

Apart from these two institutions, analysts at HSBC too cut its crude oil price forecast over the next three years, over a prolonged supply glut.

Oil prices fell by 47 percent in 2015 and are expected to decline, on an annual average, by another 27 percent in 2016, according to the World Bank.

Traders are also watching the dollar ahead of the US Federal Reserve policy meeting that started Tuesday.

“I think you’re going to see more capital spending cuts – it usually happens when prices start to bottom out”, said Phil Flynn, analyst at the Price Futures Group brokerage in Chicago.