Oil prices have not reached rock bottom and could continue falling well into next year, the west’s energy watchdog has said.
The International Energy Agency (IEA) said there was a growing glut of crude on world markets, while it expected demand to slow next year. “The bottom of the market may still be ahead,” the IEA said in its monthly report.
It forecast global demand growth to be 1.2m barrels per day (bpd), down from 1.4m this year and far less than needed to balance growing supply.
“The rebalancing that began when oil markets set off on an initial 60% price drop a year ago has yet to run its course. Recent developments suggest that the process will extend well into 2016,” it said.
“The oil market was massively oversupplied in the second quarter of 2015, and remains so today. It is equally clear that the market’s ability to absorb that oversupply is unlikely to last. Onshore storage space is limited. So is the tanker fleet … something has to give.”
The global glut arose from a spike in US oil supply on the back of shale exploration and OPEC’s decision not to reduce output but rather fight for market share with rival producers.
But the fall in prices to $50-$60 (£32-£38) a barrel in recent months from a high of $115 a year ago has yet to depress North American supply.
via The Guardian