A recent rise in oil prices is a “false dawn” and the oversupply of crude is set to worsen, according to the International Energy Agency (IEA).
The IEA expects oil stocks to grow by two million barrels a day in the first quarter and 1.5 million barrels a day in the following three months.
In January, Brent crude hit a 13-year low of $27.67. It recovered a bit, but on Tuesday was down 7.2% at $30.50.
But that is still a long way from the $112 level reached in June 2014.
The IEA forecast that stock building could continue in the second half of 2016 at a rate of 300 million barrels a day. It said: “If these numbers prove to be accurate, 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 for oil is expected to weaken. The IEA forecasts that demand growth will fall to 1.2 million barrels a day this year, from the 1.6 million barrels a day seen in 2015, the IEA said.
The think tank also questioned whether the recent rise in prices was a “false dawn” and concluded that a number of conditions increased the risk of weak oil prices.
These included doubts that Opec, the oil cartel, was in talks with other oil producing nations to reduce supply.
It also quashed speculation that Opec nations would cut output this year, stating that output from Iraq reached a new record in January. Iran has increased production ahead of sanctions being removed and preliminary data suggested that Saudi Arabia’s shipments had increased.