The world could find itself drowning in oil this year and prices could fall further as new Iranian output cancels out production cuts elsewhere – according to the International Energy Agency.
An increase in supply and weakening demand growth will ensure there is an overabundance of oil until late 2016 at the earliest the IEA said in its January report.
It said the result would be the third successive year when supply exceeded demand by 1m barrels a day and the system would struggle to cope.
The agency which advises industrialised countries said growth in global oil demand would be weaker in response to the slowing economy of China whose manufacturing sector absorbs vast quantities of the world’s oil output.
At the same time as a result of sanctions against Iran being lifted the IEA estimates 285m barrels will be added to stocks this year.
Production from non-Opec countries will fall by 600,000 barrels a day this year but Iran’s re-entry to the international market could fill the gap by the middle of 2016 – putting further pressure on prices the IEA said.