IEA says global oil market now close to balance

Global Drawdowns Embolden OPEC and Analysts, but Experts Warn That It May Merely Be a Shifting of Supplies

But OPEC also raised its forecast for supplies from non-member countries in 2017 as higher prices encourage USA shale drillers to pump more, reducing demand for OPEC's oil this year.

At the end of November, the Organization of Petroleum Exporting Countries (OPEC) agreed to cut output by 1.2 million barrels per day (mb/d) from January 1, initially for a period of six months.

The market remains torn between evidence of strong compliance by Opec members with the supply cuts they agreed at the end of previous year and a rebound in the U.S. shale industry.

"We're at a bit of a crossroads here", John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone.

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

In the months leading up to March, demand in major oil producing regions like Russia, India, several Middle Eastern countries, Korea and even the USA showed signs of slowing, forcing the IEA to slash its yearly estimate to 97.9m barrels per day.

"This would provide further support to prices, which in turn would offer further encouragement to the US shale oil sector and other producers", the IEA added. Meanwhile, it said, OPEC's oil production fell by 365,000 barrels a day in March as Nigeria and Libya suffered outages.

"New data shows weaker-than-expected growth in a number of countries including Russia, India, several Middle Eastern countries, Korea and the United States, where demand has stalled in recent months", it said.

"Even at this mid-way point, we can consider what comes next" to the output deal, the IEA says.

World benchmark North Sea Brent crude futures were up 10 cents at US$55.96 a barrel in afternoon trading Arabian Gulf time.

"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.

That is less than the organisation had anticipated previously and could prove an "optimistic" forecast, it said.

Oil prices are still around 25 per cent higher than they were a year ago, and roughly stable over the past three months, despite frequent day-to-day volatility.

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