Moody’s Investors Service has significantly slashed its price forecast for Brent crude and West Texas Intermediate crude as continued high levels of output by global oil producers have largely surpassed the growth in oil consumption.
The prospective lifting of Iranian sanctions could add significant supply to the market in 2016, offsetting or even exceeding expected declines in US production.
Accordingly, this will lead to a prolonged period of oversupply that will continue to keep oil prices low, the rating agency expects.
“OPEC oil producers continue to produce without restraint as they compete for market share, exacerbating the currently saturated markets,” says Terry Marshall, a Moody’s Senior Vice-President.
“Russia has also greatly increased production and the possibility that sanctions will be lifted on Iran in 2016 could flood the market with even more supply,” Arab News cities Marshall as saying.
In the meantime, OPEC Secretary-General Abdullah al-Badri said on Tuesday that global crude oil prices at seven-year lows will not continue and could swing upwards in as little as a year, as the low-price cycle leads to cuts in output from some producers.
“I’ve been in the oil business all my life. I saw six cycles – I saw very high price, I saw low price and this is one of them. This will not continue,” Badri said at the first OPEC-India Energy dialogue in New Delhi.