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Statoil's chief economist sees market recovery during 2016

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Norway's Statoil expects the oil market to recover from over-supply and reach a better balance during 2016 after years of over-production have led to the sharp drop in oil prices.

[SANDEFJORD] Norway's Statoil expects the oil market to recover from over-supply and reach a better balance during 2016 after years of over-production have led to the sharp drop in oil prices.

This view contradicts forecasts from the International Energy Agency (IEA) which expects an over-supplied market until at least late 2016 and oil price possible below current 12-year low.

"We can not rule it (continued oversupply) out if Iran surprises on the upside. At the same time you need relatively low demand growth in China. Then you can come in the situation IEA predicts", Statoil's chief economist Erik Waerness told Reuters on a conference Wednesday.

But that is not Statoil's preferred scenario.

"The most probable outcome is that production in Iran will grow by 300- to 500,000 barrels per day during the year while production in some areas outside Opec will drop. Then you will have a recovery because of strong demand growth, which may show 1.5 million barrels per day", Waerness said. "Then the most likely outcome is that the market will balance in 2016." Oil prices has dropped from $115 in summer 2014 to $28 per barrel on Wednesday, the lowest since 2003.

Also Opec expects oil market will rebalance in 2016 despite more Iran oil after UN has lifted it's sanctions against the country. Iran itself targets a production growth of 500,000 barrels per day in 2016.

REUTERS