LONDON, July 10 (Reuters) - Massive oversupply is likely to push oil prices down even further, the International Energy Agency (IEA) said on Friday, adding that the rebalancing of the market was likely to last well into 2016.
The agency, which advises the world’s biggest economies on energy policy, said “something has to give” because the world oil market was unable to absorb the huge volumes of fuel now being produced.
“The oil market was massively oversupplied in 2Q 2015, and remains so today,” the IEA said in its monthly report.
“It is equally clear that the market’s ability to absorb that oversupply is unlikely to last. Onshore storage space is limited,” it said, adding: “Something has to give.”
“The bottom of the market may still be ahead.”
Core members of the Organization of the Petroleum Exporting Countries have been pumping strongly for most of the last year in an attempt to regain market share.
Oil prices have staged a recovery this year after hitting a near six-year low close to $45 in January. Prices collapsed from $115 in June 2014 in a decline that deepened after OPEC refused to prop up prices and chose instead to defend its market share.
By 0800 GMT on Friday, benchmark Brent crude oil was trading at around $59.50 a barrel.
The IEA said OPEC crude oil production rose 340,000 barrels per day (bpd) in June to 31.7 million bpd, a three-year high, led by record output from Iraq, Saudi Arabia and the United Arab Emirates.
The IEA said Saudi Arabian crude oil supply rose 50,000 bpd to a record high of 10.35 million bpd in June, while Iraq crude oil output surged 270,000 bpd in June to its highest-ever rate of 4.12 million bpd.
Meanwhile, world oil demand growth is slowing.
The IEA trimmed its forecast for global oil demand growth this year slightly to 1.39 mln bpd and said it expected global demand growth to slow to 1.2 million bpd in 2016.
But a recent period of much lower oil prices is beginning to take its toll on oil production in non-OPEC countries, particularly the United States, where an unprecedented rise in production of light oil from shale has transformed the oil industry over the last five years.
The IEA said non-OPEC supply growth was expected to grind to a halt in 2016 as lower oil prices and spending cuts take their toll. It forecast zero growth in non-OPEC oil supply in 2016 after an increase of 1 million bpd in 2015. (Reporting by Christopher Johnson and Dmitry Zhdannikov)