Oil prices fell as much as 3 percent on Tuesday after both the world’s consumers and producers revised forecasts that signaled the global crude glut persisting for much longer than previously expected.
The International Energy Agency (IEA), which advises oil-consuming countries on their energy policies, said a sharp slowdown in oil demand growth, coupled with ballooning inventories and rising supply, means the market will be oversupplied at least through the first half of 2017.
The IEA’s comments follow a surprisingly bearish outlook from the Organization of the Petroleum Exporting Countries on Monday that also pointed to a larger surplus next year due to new fields in non-member countries and as U.S. shale drillers prove more resilient than expected to cheap crude.
“It seems the situation has deteriorated strongly in the eyes of OPEC, as well as the IEA,” said Commerzbank head of commodities strategy Eugen Weinberg.
“I wouldn’t be surprised to see this price weakness continue for a while, because that was not on the cards, in our opinion.”