The U.S. government forecast sees little hope of near-term relief for energy producers out of the the plummeting crude prices as the global oil glut swell until late next year, Reuters reports Wednesday.
U.S. Energy Information Administration said that increased Iranian oil output is expected to feed the 2016 global glut. The government agency sees a steady growth in global demand of oil that will help ease the glut only in the third quarter of 2017.
EIA said in its forecast for next year's global oil production that it would likely "rise to nearly 96.7 million barrels per day from more than 95.9 million bpd this year." Demand in oil production next year is seen to grow the same rate as 2015 and 2016 which is only by 1.4 million bpd.
Meanwhile, production in U.S. is expected to decline by 700,000 bpd to 8.7 million bpd and will decline to about 8.5 million bpd in 2017.
According to Kevin Book, energy policy analyst at ClearView Energy Partners, if emerging economies don't warm up, the oil price won't likely to increase until late 2017.
The EIA also predicted that if Western sanctions are lifted, Iran's oil exports would increase by 2017; growing by 500,000 bpd that year. While the timing of Western sanctions relief is uncertain, the agency assumed that the implementation of the nuclear deal will happen around early this year.
Consistent strong oil production in leading oil producers such as Saudi Arabia has added to the supply glut while U.S. oil producers have been greatly affected.
This year, brent crude should average $40 a barrel while it should increase by $10 making it $50 a barrel in 2017. U.S. prices average cost is about $2 per barrel, which is lower than Brent this year and $3 lower the following year.
Adam Sieminski head of the EIA said Tuesday in an interview that the agency's oil price forecast is still "fairly modest", while it takes a while for the process of rebalancing global prices even if it's under way.
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