The International Energy Agency's "drown in oil supply" comment triggered a fresh fall in global crude oil prices on Wednesday, with the US crude plunging below $28 a barrel in Asia -- a new 12-year low. In its 19 January update, the world energy body has forecast that demand in 2016 would moderate to 1.2 million barrels per day.
The West Texas Intermediate (WTI) slipped to $27.92 a barrel before recovering later. The WTI had dropped below $28 about 12 years ago in September 2013, reports PTI.
In its Oil Market Report released on Tuesday, the IEA said global oil demand declined to a one-year low in the last quarter of 2015 to 1 million barrels per day, from an almost five-year high of 2.1 million barrels per day in the third quarter. In addition to the weakness in China, Brazil and Russia, the relatively mild temperatures in Japan, Europe and the US contributed to lower demand, the IEA report said.
The report painted a grim picture of the global glut, saying Iran could add to the existing oversupply situation, now that sanctions on the country have been lifted.
"Iran, now relieved of sanctions, insists it will boost output by an immediate 500 kb/d. Our assessment is that around 300 kb/d of additional crude could be flowing to world markets by the end of the current quarter."
The daily production of crude oil touched a high of 32.28 million barrels per day, despite the fall of 90,000 barrels per day by OPEC countries, the report added.
Net importers of crude oil such as India have been the biggest beneficiaries of the windfall. India meets about 80% of its crude oil requirements through imports, according to the union petroleum and natural gas ministry's Petroleum Planning & Analysis Cell (PPAC).
The country imported crude oil valued at $55.6 billion during April-November 2015, down sharply from $97.3 billion during the corresponding period last fiscal, though the quantity had gone up from 139.1 million metric tonnes to 150.2 million metric tonnes.
The PPAC has estimated India's fiscal 2016 oil import bill at $69 billion, down sharply from $113 billion last financial year, on the presumption that during December 2015 to March 2016, the price will be $50/barrel and the dollar-rupee exchange rate would be 65/$.
The rupee was trading at 68.13 on Wednesday afternoon, not far from its all-time low of 68.85 recorded on 28 August, 2013.