Market and product

The price slump in Crude Oil has been a thing of worry for commodities markets that had serious impact on many economies across the world. However, commodities markets should wait more to see the oil price recovery as oil prices are likely to remain low through 2016 and 2017 as supply-demand mismatch is likely to cntinue.

US Energy Information Administration's(EIA) short term outlook says Brent crude oil prices will average $40 per barrel (b) in 2016 and $50/b in 2017. West Texas Intermediate (WTI) crude oil prices are expected to be $2/b lower than Brent in 2016 and $3/b lower than Brent in 2017.

Crude oil prices are expected to remain low as supply continues to outpace demand in 2016 and more crude oil is placed into storage. EIA estimates that global oil inventories increased by 1.9 million b/d in 2015, marking the second consecutive year of inventory builds.

Inventories are forecast to rise by an additional 0.7 million b/d in 2016, before the global oil market becomes relatively balanced in 2017. The first forecasted draw on global oil inventories is expected in the third quarter of 2017, marking the end of 14 consecutive quarters of inventory builds.

OPEC crude oil production is forecast to increase by 0.5 million b/d in 2016, with Iran accounting for most of that increase. Iran is expected to increase its production once international sanctions targeting its oil sector are suspended.

Although uncertainty remains as to the timing of sanctions relief, EIA assumes this occurs in the first quarter of 2016. EIA's timing reflects Iran's progress in meeting key obligations required under the Joint Comprehensive Plan of Action, which has been faster than previously anticipated.

EIA expects global consumption of petroleum and other liquid fuels to grow by 1.4 million b/d in both 2016 and 2017. Forecast real gross domestic product (GDP) for the world, weighted by oil consumption, which increased by an estimated 2.4% in 2015, rises by 2.7% in 2016 and by 3.2% in 2017.