However, the International Energy Agency on Tuesday said that supply and demand in the global oil market is likely to move close to balance in the second half of the year.
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It expects to supply most of the new demand as it sees daily non-OPEC production falling from last year’s levels by 740,000 barrels, to 56.4 million barrels.
“At halfway in 2016, the oil market looks to be balancing; but we must not forget that there are large volumes of shut-in production”, according to the IEA’s widely watched monthly oil report. U.S. output will shrink by 150,000 barrels a day in the quarter 3 2016 compared with the first half as producers cut production due to a low oil price environment.
In early trade on Tuesday, Brent crude futures fell 38 cents since their last settlement to trade below $50 a barrel at $49.97.
The cartel anticipated oil output in Former Soviet Union (FSU) to grow by 60,000 barrels per day in 2016, revised up due to upward revisions in Russia, Azerbaijan and Turkmenistan this month. Rigs targeting crude in the US rose by 3 to 328 last week, capping the longest run of weekly gains since August, Baker Hughes Inc. said Friday. Iran, now the fastest-growing OPEC member as it restores exports curbed by worldwide sanctions, may boost output by 100,000 barrels a day next year to 3.7 million a day.
Oil futures fell even lower Wednesday following concerns about global economic conditions, the state of the US economy, and increased domestic drilling activity.
But OPEC cautioned: “Nevertheless, there is still a massive global supply overhang”.
Next year, India’s forecast demand growth of more than 8 per cent, together with China’s slower but still significant 3.3 per cent growth is expected to keep demand growth steady.
The global oil demand is especially driven by fuel, in a context of lower prices and vehicle sales rebound, the report said.
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More recently unexpected loss of supply due to disruptions in major fields cut global oil production by almost 0.8 mb/d in May, with falls in both OPEC and non-OPEC countries.
