Global oil demand flipped from a five-year high in the third quarter at 2.1 million b/d to a one-year low in the fourth quarter of 1.0 million b/d, which does not bode well as new Iranian output overcomes declines in U.S. production, the International Energy Agency (IEA) said Tuesday.

In its monthly market report, the global energy watchdog said persistent oversupply, bloated inventories and negative economic news pressured prices to the point that by mid-January crude oil touched 12-year lows. The Oil Market Report for 2016 has worldwide oil demand growth moderating to 1.2 million b/d.

Higher prices aren’t likely through at least the first half of the year, a consensus view held by several analysts.

“There could possibly be some relief in the second half of the year as people inevitably look forward to 2017,” IEA’s Neil Atkinson, head of the oil industry and markets division, said. “But even in 2017 we’re not expecting a big rebound.”

IEA estimated that global oil supply expanded by 2.6 million b/d last year, following hefty gains of 2.4 million b/d in 2014. By December, however, growth had eased to 0.6 million b/d, with lower production from countries not members of the Organization of the Petroleum Exporting Countries (OPEC), which “pegged below year-earlier levels for the first time since September 2012.” Production outside OPEC is heavily weighted to U.S. production.

OPEC crude output eased by 90,000 b/d in December to a “still-lofty 32.28 million b/d, including newly rejoined Indonesia,” IEA researchers said. “Iran, now relieved of sanctions, insists it will boost output by an immediate 500,000 b/d. Our assessment is that around 300,000 b/d of additional crude could be flowing to world markets by the end of the current quarter.”

Worldwide inventories rose by about 1 billion bbl in 2014-2015, with the IEA now forecasting a further build of 285 million bbl over the course of this year. Saudi Arabia, Iraq and Russia have benefited from the three-year sanctions against Iran, which kept it out of the oil markets. Sanctions were lifted last weekend.

“With Iran coming back in, those countries are going to go toe to toe,” said Atkinson. “There will be plenty of supply coming onto the market even though non-OPEC supply is falling. So it’s still a very gloomy outlook.”

Saudi Arabia has an estimated 2.5 million b/d of spare capacity, but how much it may be willing to put on the market to maintain its world share “is going to be one of the really interesting angles over the next few months,” Atkinson said. “And we’re waiting to see if 2016 turns out to be a year of standstill for Iraq or if they are able to squeeze any more out.”