Market expectations on Brent for Q1 2016

The International Energy Agency (IEA) announced on Tuesday that the world's oil market is not far from deepening the never-ending oversupply this year, and prices are likely to dip further in 2016 if this trend of production and weak demand continues.

The IEA projected that 2016 will be a year of weak demand, mainly as a result of the Chinese economic slowdown, added to rising supply on the market due to Iran's lifted sanctions. Although non-OPEC countries' production is expected to fall by 600,000 barrels a day over the year, this gap will be filled with Iran's re-entry to the global Oil Market.

The downbeat outlook comes as both benchmarks have plunged more than 20% since the beginning of the year, amid a perfect storm of global growth fears, warm weather and concerns that the Organization of the Petroleum Exporting Countries will fail to cooperate in cutting production. Moreover there's China's Yuan depreciation, of course, which makes oil importing more expensive for the world's second largest economy.

J.P. Morgan Commodities research estimates that US crude supply will fall by 0.5mb/d next year. In addition, incremental Iranian crude supply, following the potential relaxation of international sanctions in early 2016, is likely to remain well below the government's target.

The bank's forecast downgrade follows a run of oil comments and outlook changes last week. For example, Goldman Sachs said it still sees oil climbing back to $40 a barrel by midyear, while U.K.-based Standard Chartered warned prices could fall as low as $10.

However, when looking at the average price forecast for 2016-and not just the expected low-point-J.P. Morgan is by far the most pessimistic of the major banks.