Evidence of falling US production and and a drop in supplies outside of the Opec cartel will help the oil market "move close to balance” in the latter half of 2016, the world’s leading energy body said on Thursday.
As demand holds steady the rebalancing "is now taking shape,” said the International Energy Agency in its monthly closely watched oil market report.
Crude prices rallied to the highest level so far this year on Tuesday amid further signs of a drop in US output, writes Anjli Raval.
"The much-anticipated slide in production of light, tight, oil in the United States is gathering pace,” said the IEA which expects a fall in non-OPEC supply in 2016 of 700,000 b/d.
Global oil supplies dropped by nearly 300,000 b/d in March to 96.1m b/d, with non-OPEC accounting for two-thirds of the decrease.
Market participants are holding out hope that this weekend’s producer talks in Doha will lead to a deal to help alleviate "a still massive supply overhang”, the IEA said.
However the body that is the energy watchdog for industrialised nations added: "If there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited.”
Opec crude oil production fell by 90,000 b/d in March to 32.5m b/d as outages in Nigeria, the UAE and Iraq more than offset a further increase from Iran and higher flows from Angola. Supply from Saudi Arabia dipped in March but held near 10.2m b/d.
The pace of Iran’s return to the market after the lifting of sanctions against its oil industry "is more measured than some expected”. But production in March was still nearly 400,000 b/d higher than at the start of the year, the IEA said.
Against the backdrop of a downbeat global economic outlook from the International Monetary Fund, the IEA estimates demand growth will stand at 1.2m b/d this year to 95.9m b/d. Growth is lower than the 2015 figure of 1.8m b/d.
"Strong gains in India remain one of the most persistent demand supports.”
