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 said in a report that a surplus of supply compared to demand in early 2016 was greater than it predicted.
It now 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.
Demand growth will fall to 1.2 million barrels a day this year, the IEA said.
In January, Brent crude touched a 13 year-low of $27.67, but has since recovered to $33.23. However, prices are far below the post-financial crisis peak of $112 a barrel, reached in June 2014.
Demand growth is expected to slow from the 1.6 million barrels a day seen in 2015, “pulled down by notable slowdowns in Europe, China and the US”.
The IEA forecast that stock building could continue in the second half of 2016 at a rate of 300 million barrels a day in demand growth. It said: “If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term.”
The think tank questioned whether the recent rise in prices was a “false dawn” and concluded that a number of conditions increased the risk of weak oil prices.
These included doubts that Opec, the oil cartel, was in talks with other oil producing nations to reduce supply.
It 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 preliminary data suggested that Saudi Arabia’s shipments had increased.
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