Kilduff: Here Are Three Reasons Why the Oil Market Won't Rebalance Soon

Kilduff says the U.S. dollar and weak Asian economies will keep us mired for some time.

More doubts about the International Energy Agency's prediction last week that global oil markets will soon begin to rebalance come in the form of oil expert John Kilduff, who told CNBC's Worldwide Exchange Friday that "I don't see this market coming into balance until at least the first quarter of 2017, if not later."

Kilduff cited three reasons for his position that he believes are being ignored by other analysts, the first being the state of the U.S. dollar: "I think the currency headwind is going to emerge, there's no way the dollar can stay this low versus some of these major currencies going forward" – meaning that when the dollar escalates, it will negatively impact foreign buyers.

His second argument is that the economies of China, Japan, South Korea, and other countries of what he calls "the Asian demand centre" are struggling.

Third and most important, Kilduff said, "we are still oversupplying the daily needs of the globe by 1.5 million barrels [per day]," which he sees as the most obvious factor that will negatively affect prices.

While he sees prices coming under pressure, Kilduff did not say how low he sees them going, although in March he predicted they will fall to $25/bbl.

For bunker buyers, that should mark a return of IFO380 bunkers in some of the primary ports to $120 per metric tonne (pmt) or lower.

On a global basis, having slipped under $180 pmt in January, on Friday Ship & Bunker's Global Average Bunker Price hit $250 pmt.

Although the IEA seems to be taking heat for its positive outlook last week, Neil Atkinson, head of oil industry and markets for the agency, warned that while all signs indicate a rebalance of the market soon, the enormity of the oversupply is such that prices will not reach acceptable levels "for some time to come."