The International Energy Agency said unusually mild weather and rising supply will keep the oil market oversupplied until at least late this year. Fred Katayama reports.
Crude prices could drop even more with the world awash in oil. The International Energy Agency warns in its January report "... the oil market could drown in over-supply ... It could go lower." The IEA said the market could face a situation whereby oil output outstrips demand by 1 billion barrels per day for the third straight year. Adding to the supply: Iran. It expects the country to add 300,000 barrels a day by the end of March, now that international sanctions have been lifted. Adding to oil's woes: a sharp drop-off in demand. Sparking that, the IEA says: unusually warm weather in the U.S., Japan and Europe and weak demand from commodity producing countries like China, Brazil, and Russia. As a result, global demand has flipped from a near five-year high in the third quarter last year to a one-year low in the following quarter. And there doesn't seem to be any relief in sight: the International Monetary Fund just cut its global growth forecast. And China reports that its economy, the world's second largest, expanded at its weakest pace in a quarter of a century last year. Brent crude rallied Tuesday, but U.S. oil prices fell. Oil is trading at its lowest level in nearly 12 years, down more than 70 percent over 18 months.