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Published on : Oct 13, 2015

Oil prices on Tuesday retreated amid traders absorbing bearish forecasts regarding the ongoing oversupply. 

Representing some of the largest oil consumers in the world, the International Energy Agency said on Tuesday that the demand for oil will slow down next year and the expected return of Iranian crude oil will pile on the current glut. The agency stated that the global glut will continue into the next year and warnings issued by Citigroup Inc indicate that it could possibly last longer than that. 

The Paris based agency in its monthly report said that it is likely the market will be off balance for some more time. 

Sweet and light crude oil aimed for delivery next month settled at US$ 46.66 per barrel on the New York Mercantile Exchange, down by 0.9 per cent or 44 cents. The global benchmark Brent settled at US$ 49.24 per barrel on ICE Futures Europe, dropping 1.2 per cent or 62 cents. 

Earlier in the day, both had witnessed gains and the US benchmark rose almost 3 per cent. However, many believed that the gain was mainly an overreaction to a small piece of information existing in the market. 

The report by the International Energy Agency emphasized on the various unsettled matters that bearish analysts have been focusing upon for several months. Citigroup has been the most bearish among the rest on the topic of crude and on Tuesday, issued a note that agreed with the assessment by IEA that oil markets could possibly be imbalanced until late next year. The company called the recent rallies extremely optimistic and even compared them to a rise in crude prices earlier this year that failed after a good start. 

Analysts at the bank said that there is an extremely long list of bearish forces that are still in the market. These could be related to OPEC production, inventory increases, or oil demand.