Global rating agency Moody's Investors Service on Friday slashed its crude oil forecast for 2016 by $10 to $33 a barrel, citing continued oversupply in the global oil markets.
Moody's said the oil supply glut will continue to persist this year due to addition of 500,000 barrels per day (bpd) from Iran, even as the demand remains tepid.
The agency now expects the benchmark Brent crude prices to average $33 a barrel (bbl) in 2016 compared to earlier estimate of $43 a barrel. However, it forecasts the crude oil prices to rise by $5/bbl on average in 2017 and 2018.
Despite a fall in oil prices to 12-year lows this week, the Organization of the Petroleum Exporting Countries (Opec) and many non-Opec oil producers stay reluctant to prune output on fears over loss in market share.
Resumption in oil supply from Iran will "offset or exceed" nearly 500,000 bpd fall in the US production in 2016, Moody's said in a report, according to Business Standard.
In its Oil Market Report released on 19 January, the International Energy Agency (IEA) said global oil demand declined to a one-year low in the last quarter of 2015 to 1 million bpd, from an almost five-year high of 2.1 million bpd 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.