The International Energy Agency (IEA) said on Tuesday that the huge stockpiles of oil will keep a cap on future price increase. The agency issued the warning as crude oil prices fell.
"In any event, following three consecutive years of stock build at an average rate close to 1 mb/d there is an enormous inventory overhang to clear," The IEA said in its latest Oil Market Report.
"This is likely to dampen prospects of a significant increase in oil prices," it added.
The report highlights the steady rising of global demand for oil due to solid economic growth. Meanwhile, supply has been curbed by unexpected cuts in production due to the falling shale production in the US, rebel attacks in Nigeria, and the wildfires in Canada.
The agency said that worries about big stocks have caused the oil price to fall back from $51 ( P2,368.95) which was reached in early May. The IEA expects rebalancing to be fully in place in the second quarter of 2016. Rebalancing happens when the oil price is pushed above the key level of $50 (P2322.50) as supply came closer to matching demand.
"At halfway in 2016 the oil market looks to be balancing; but we must not forget that there are large volumes of shut-in production, mainly in Nigeria and Libya, that could return to the market, and the strong start for oil demand growth seen this year might not be maintained," the IEA explained.
IEA also predicts a supply growth of 0.2 mb/d in non- Organization of the Petroleum Exporting Countries (OPEC) in 2017.
"We see global oil demand growing at the same rate as in 2016 - 1.3 mb/d," the agency said.
Meanwhile, the agency stresses out that its latest Oil Market Report is just their first look at 2017 and that the huge number of moving parts may cause them to adjust the numbers accordingly.