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Oil prices rose on Tuesday as data showed Chinese oil demand likely hit a record high in 2015, but contracts remained below $30 a barrel as the IEA said the market should stay oversupplied until at least the end of this year.
Brent crude futures, the global benchmark, traded up 75 cents or 2.6 per cent at $29.30 a barrel at 0918 GMT. US crude futures were up 20 cents at $29.62 a barrel, maintaining their unusual premium over Brent.
“It seems to be a healthy upside correction in an otherwise downtrending market,’’ said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Traders said prices drew support from strong oil demand in China. Preliminary Reuters calculations based on government figures showed record oil consumption of 10.32 million barrels per day (bpd), up 2.5 per cent from 2014, defying slowing growth in the world’s second-largest economy.
IEA estimates
But oil prices remained near 12-year lows as a global glut was set to last until at least late 2016, according to the International Energy Agency, which advises industrialised countries on energy policy.
“We conclude that the oil market faces the prospect of a third successive year when supply will exceed demand by 1 million bpd and there will be enormous strain on the ability of the oil system to absorb it efficiently,’’ the IEA said.
The agency left its estimate of growth in global demand for 2016 unchanged from its previous monthly report at around 1.2 million bpd.
Oil prices have fallen more than 70 per cent in the past 18 months as exporters around the world pump over a million barrels of crude every day in excess of demand.
Iran oil output
The oversupply is set to worsen with the return of Iranian barrels to the market following the lifting of nuclear-related Western sanctions.
Iran said it could increase oil output by 500,000 bpd and issued an order to start the ramp-up on Monday.
Most analysts expect Iran’s full return to oil markets to be relatively slow due to the need to overhaul its infrastructure following years of under-investment, but the country is also estimated to have stored 12-14 million barrels of crude and 24 million barrels of condensates for immediate sale.
Goldman Sachs said Iran’s production would rise by 285,000 bpd in 2016 while BMI Research said the increase would be by 400,000 bpd.
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