In recent weeks, oil prices rallied well off $27.87 lows to more than $34 a barrel.  But it’s likely to have been nothing more than a short-lived rally, as the International Energy Agency (IEA) says oversupply is about to get a bit worse…

The IEA now expects for oil stocks to grow by two million barrels a day in Q1 2015, and 1.5 million by Q2.  “If these numbers prove to be accurate,” it notes, “and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term.”

Meanwhile, demand is expected to weaken, as well.

Demand is forecast to fall to 1.2 million barrels a day this year, from the 1.6 million we’ve seen in 2015.  None of this should come as a surprise, though.  We’ve been warning about the imbalance in supply-demand for quite some time.

Oil Spot Price

And if you think OPEC will rescue the oil market, think again.  They won’t come to the rescue any time soon.  We also have to consider the record output from Iraq, where oilfields are producing as much as 4.13 million barrels a day.

And then there’s Iran, which could ramp up production to 500,000 barrels a day, drenching an already saturated oil market even more.

Even here in the United States, the capacity to store oil has been exhausted…

Cushing, Oklahoma storage tanks are nearing limits, for example, raising even more problems for oil prices.

At this rate, oil could easily plunge well under $20 a barrel within months.

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