IEA says global oil market now close to balance

Posted April 14, 2017

Oil prices declined today, with U.S. benchmark WTI futures down 10 cents at Dollars 53.01 per barrel, and Europe's Brent contracts four cents lower at USD 55.82. In its short-term outlook report released Monday, the EIA said it expects to see record US oil production in 2018.

But the organisation predicted supply would grow in coming months, with United States oil-producing firms driving the increase.

If OPEC decides to extend the production cut deal a further six months during its meeting on 25 May, this would provide further support to oil prices but imply bigger stock drawdowns, the agency said.

Oil prices have stabilised in recent weeks and could be boosted further if the cartel chose to extend its output reductions beyond the summer, the Paris-based agency said.

Then in December, non-OPEC producers led by Russian Federation agreed to cut their own output to 558,000 barrels per day.

Oil prices were little changed in modest volume on Thursday, during a week in which crude benchmarks recouped more of March's losses on increased hopes world supply and demand were nearing balance.

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Prices had been nearly unchanged earlier in the day as concerns over rising USA production offset support from data showing the first weekly drawdown in US oil inventories in a month.

Oil inventories in the 35-nation Organisation for Economic Cooperation and Development increased by 38.5 million barrels in the first quarter to about 3 billion barrels, offsetting the decline in emerging economies, according to the IEA.

The EIA's report also showed that USA crude production last week increased by 36,000 barrels per day to a total of 9.235 million barrels a day. "We have an interesting second half to come", the agency added. Meanwhile, it said, OPEC's oil production fell by 365,000 barrels a day in March as Nigeria and Libya suffered outages.

"The net result is that global stocks might have marginally increased in the first quarter versus an implied draw of about 0.2 million bpd", the IEA said.

The IEA trimmed its oil demand growth forecast for 2017 by 40,000 barrels per day and warned that its revised level of 1.3 million barrels per day "could prove optimistic".

The combination of factors could keep a lid on oil prices, which have risen in the past six months after a three-year slump.