Oil sinks as IEA warns of falling prices; WTI below $28

Oil prices sank again Tuesday as the International Energy Agency warned prices could fall further on a growing oversupply and weakening global demand growth.

US benchmark West Texas Intermediate for March delivery dropped $1.75 (5.9 percent) to $27.94 a barrel on the New York Mercantile Exchange.

In London, Brent North Sea crude for delivery in April, the European benchmark for crude oil, dived to $30.32 a barrel, shedding $2.53 (7.7 percent) from Monday's settlement.

Both WTI and Brent had fallen more than three percent Monday.

The IEA, in its monthly report Tuesday, forecast the global oil surplus would be larger than previously expected in the first half of 2016.

It noted that OPEC was responsible for the supply glut hitting the market, adding that Saudi Arabia, Iraq and sanctions-free Iran had "all turned up the taps" in January.

"With the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term," it said.

"In these conditions the short-term risk to the downside has increased."

The IEA maintained its view that global demand growth "will ease back considerably" in 2016 to 1.2 million barrels a day from 1.6 million barrels a day in 2015.

Late last month, prices rallied briefly on speculation that Russia -- the largest global oil producer -- and the 13-nation Organization of the Petroleum Exporting Countries cartel could discuss coordinated output cutbacks.

But the IEA said that "the likelihood of coordinated cuts is very low."

Matt Smith of ClipperData noted that the US Department of Energy's short-term outlook report, also released Tuesday, gave a similar picture of the market.

"So the combination of both these reports might be sending crude charging low into the $20s again," he said.

WIT in January fell below $28 a barrel for the first time since September 2003.

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