No respite, as crude oil prices to fall further: IEA

International Energy Agency in its monthly report warned about oil prices to fall even further as oversupply worry looms. Increased OPEC output and return of Iranian oil will add to the glut.

A recent rise in oil prices is a "false dawn" and the oversupply of crude is set to worsen, according to the International Energy Agency (IEA). The IEA expects oil stocks to grow by two million barrels a day in the first quarter and 1.5 million barrels a day in the following three months, to further add pressure on the already lower crude prices.

Having peaked, at a five-year high of 1.6 million barrels per day (mb/d) in 2015, global oil demand growth is forecast to ease back considerably in 2016, to 1.2 mb/d, pulled down by notable slowdowns in Europe, China and the United States, as per the newly released IEA  Oil Market Report. Meanwhile demand for oil is expected to weaken. IEA forecasts that demand growth will fall to 1.2 million barrels a day this year, from the 1.6 million barrels a day seen in 2015.

In January, Brent crude hit a 13-year low of $27.67. It did see bounce back from those levels due to reports of OPEC and Russia coming to an agreement to cut oil supply in order to boost prices. IEA raises considerable doubts about any such agreement taking place in the near future. Oil-cartel led by Saudi Arabia looks reluctant to cut on supply.

OPEC crude oil output rose by 280 000 barrels per day in January to 32.63 mb/d as Saudi Arabia, Iraq and a sanctions-free Iran all turned up the taps. Supplies from the group during January stood nearly 1.7 mb/d higher year-on-year.

IEA also quashed speculation that OPEC nations would cut output this year, stating that output from Iraq reached a new record in January. Iran has increased production ahead of sanctions being removed and data suggested that Saudi Arabia's shipments had increased. According to, the IEA forecast stock building could continue in the second half of 2016 at a rate of 300 million barrels a day.

The report did mention that non-OPEC supply slipped 0.5 mb/d month on month. IEA expects non-OPEC output to decline by 0.6 mb/d, to 57.1 mb/d for 2016. The new oil from OPEC almost offset significant declines in production around the rest of the world in January, the IEA said.