With the U.S. sustaining high levels of oil production and storage capacity beginning to run out, the International Energy Agency says global oil prices could fall even lower through the end of this year.
“On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however,” the IEA states in a monthly update. “U.S. stocks may soon test storage capacity limits. That would inevitably lead to renewed price weakness, which in turn could trigger the supply cuts that have so far remained elusive.”
Reuters reports that the rebound in global oil prices, to about $60 per barrel from a low of $46, was a response to a sharp reduction in the number of drilling rigs in operation in the U.S. “Yet U.S. supply so far shows precious little sign of slowing down,” the IEA reported. “Quite to the contrary, it continues to defy expectations.”
Over the last month, Citigroup analysts have suggested oil prices could go as low as $20 per barrel.