Oil has been on a wild ride down this week. And, with hours to go for the US Fed meet, Bloomberg TV India caught up with Amrita Sen, Chief Oil Market Analyst at Energy Aspects.

We had the OPEC Secretary General in India on Tuesday and he said the non-OPEC output may fall in 2016. Is there any relief for the oil market that is seeing excessive over-supply this year?

Ideally it is a start. We also expect the non-OPEC supply to fall next year, by around 200,000 bbl/day. But given how much we are over supplied at the moment, that is not going to be enough to completely rebalance. But we do think by the second quarter of 2016 we should see the re-balancing process kick in.

Will we see $20/bbl before $100/bbl again?

I think it is possible that we go into the low $30s or even late $20s. I think the single biggest reason behind why we had renewed weakness in crude at the moment is actually a very warm winter. Because of the El-Nino effect we had a very warm winter in Asia so far, same in the US, and that has really meant that heating oil futures are down. Our view too had been that the only reason why crude would go down as much would be weakness in the distillate market.

Does the Contango effect start to play out this time — as it did in 2008?

What the Contango means is that if you have got excess crude supplies, you need to store it and if you are going to store it on tankers on sea, it needs to pay for you to store it. You will be paying the cost of the tankers, the interest payments and all of that; which is why today's price needs to be lower than tomorrow’s prices and that is the only reason why you will actually store it on tankers. At the moment the Brent contango is actually very shallow, about 40 cents, but you need about $1.20 between each contract to make it profitable. You are seeing some floating storage of Singapore of the Dubai contract but Brent’s not there yet.

As we look into 2016, how big a role does the dollar, OPEC and geo-political action play?

I think dollar strength is priced in to a large extent. People are expecting a rate hike and that shouldn’t be too much of an issue in 2016. I think the main thing to watch out for would be OPEC. At the moment, interestingly enough, non-OPEC supply growth, which was 2.2 million bbl/day at the start of the year, has pretty much ground to a halt, and is now only 300,000 bbl/day in November. That is probably going to go negative by Q1 next year. So that is where the re-balancing is taking place. The entire oversupply of today is from OPEC. Now we think given the price fall Iraq will actually struggle to grow output from here. So that is where the dynamics gets interesting because these are cash-strapped producers, some of the OPEC members — that is Nigeria, Libya, Iraq — and those are the downside risks to production and therefore upside risk to prices that we really should be watching out for.

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