Brent crude, the global oil benchmark, LCON6, +0.82% rose $0.43, or 1%, to $46.67 a barrel on London’s ICE Futures exchange.
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The Paris-based agency said global oil stocks will experience a “dramatic reduction” in the second half of the year, but also warned that they will continue to increase in the first half of the year as Iran ramps up its production, adding to the almost two years of oversupply. Demand was resilient and a surplus of oil could start to shrink later this year, it added. Demand growth for the year is forecast at 1.2 million barrels a day, yielding total demand of 95.9 million barrels a day.
The IEA said the rise in Iran’s oil production and exports after the lifting of worldwide sanctions has been faster than expected.
The oil market has for months been depressed by a vast oversupply.
The agency projects that global oil inventories will drop to about 200K barrels per day in the back half of the year from the first half’s 1.3 million barrels per day in the first half.
OPEC oil output will increase in long term perspective reaching 44 million barrels per day by 2035, according to BP Energy Outlook to 2035. While inventories remain near the highest levels in more than 80 years, investors are taking comfort in the steady decline in US production. Nigeria produced about 1.7 million barrels a day of crude oil in March, the lowest level since 2009, according to the International Energy Agency.
The IEA’sOil Industry and Markets HeadNeil Atkinson told CNBC on Thursday that the expected decline in the growth of global oil stocks pointed towards a rebalancing in markets.
“We assume that OPEC acts to maintain its market share of around 40 percent, increasing output by 7 million barrels per day to 44 million barrels per day by 2035”, the report said. “The question is how much higher can and will they go before production plateaus, because that would make a resurrection of a freeze plan at the June OPEC meeting more plausible”. “The only thing that could throw a spanner in the works to prevent oil from rallying further would be the (U.S.) production”, Saxo’s Hansen said.
Iranian crude production rose to levels last seen before sanctions were imposed more than four years ago, helping to drive OPEC output to the highest in nearly eight years, Bloomberg writes. Platts attributed the increase to higher output from Iran and Iraq, which lifted production by 150,000 barrels a day each.
Combined output of the Organization of the Petroleum Exporting Countries climbed last month to 32.76 million barrels a day, the highest since April 2008.
Iran, the IEA said, had provided the other surprise.
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The country drew attention to itself last weekend when a cabinet reshuffle led to Saudi Oil Minister Ali-al-Naimi being replaced by Khalid al-Falih, the former president of Saudi Aramco.
