The oil market is faced with the prospect of drowning in oversupply, says the IEA, as it predicts oversupply of 1m barrels a day in 2016.
The report for January from the agency says there will be “enormous strain” on the system to absorb the oversupply, reports the Financial Times.
It comes as the agency said that mild temperatures in Japan, Europe and the US had dampened demand in the fourth quarter. Demand went from a near five-year high in the third quarter of 2015 of 2.1m barrels a day to a year low of 1m barrels a day in Q4.
Outside Opec, the IEA said production grew 1.3m barrels a day from 2014 to 57.6m barrels a day in 2015, amid “stubbornly robust US production”. Opec production grew by 1m barrels a day in 2015, to 32m barrels a day.
“Opec has effectively been pumping at will since late 2014, when the group agreed to maintain production in defence of market share,” said the IEA. “This year is likely to see output well beyond 32m b/d from the 13-member group as Iran ramps up production.”