Now that sanctions in Iran are lifted and the country can start selling its oil internationally again, the market stands to be greatly exacerbated by the new supplies, the International Energy Agency warned Monday.

The IEA said Iran could add around 300,000 barrels a day of additional crude by the end of the first quarter, and that the return of Iranian crude to the global market will inevitably and largely offset the 600,000 barrels a day drop that is expected in supplies from producers outside OPEC.

Global inventories, which rose by a notional 1 billion barrels in 2014–2015, will see a further build of 285 million barrels in 2016. That increase will put storage infrastructure under pressure despite significant capacity expansions.

“The oil market faces the prospect of a third successive year when supply will exceed demand by 1 million barrels per day and there will be enormous strain on the ability of the oil system to absorb it efficiently,” the IEA said in its January report.

The oil markets could be left with a surplus of 1.5 million barrels a day in the first half of 2016, and “unless something changes, the oil market could drown in oversupply,” the agency said.

Crude oil prices have plunged over the last 18 months on vast new oil supplies from inside and outside the Organization of the Petroleum Exporting Countries, according to The Wall Street Journal. On Tuesday Brent crude touched its lowest price level since 2003.

“The low price of crude has seen oil companies laying off thousands of workers and cutting their capital spending,” the WSJ wrote. A report by energy consultancy Wood Mackenzie published last Thursday found that oil companies had deferred spending of $380 billion on major projects in 2015, according to the WSJ.

The IEA maintained its expectation for global oil demand growth this year at 1.2 million barrels a day, down from the 1.8 million barrels a day in 2015 it anticipated in December.

The unseasonably mild winter saw global oil demand growth fall to a one-year low of 1 million barrels a day in the fourth quarter of last year, down from a near five-year high of 2.1 million barrels in the third quarter.

, , , , ,

One response to “New Iran Supplies Will Add to Oil Price Pressures”

  1. Further the over supply of Coal and war in Middle East. More Hydro Units, Solar, Wind energy, LNG and Shale Gas has Lastly are adding reason to over supply of Oil in the International Market.

Leave a Reply

Your email address will not be published. Required fields are marked *