July Brent crude on London’s ICE Futures exchange added $0.16, or 0.3%, to $47.76 a barrel.
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The world’s supplies of oil from outside OPEC was seen shrinking by 800,000 barrels a day over 2016 to 56.8m as low prices ate into U.S. tight-oil producers production, with the recent wildfires in Canada seen subtracting from global demand by 100,000 barrels a day. Demand was resilient and a surplus of oil could start to shrink later this year, it added.
In Canada, devastating wildfires near Fort McMurray forced a shutdown of 1.2 million barrels per day of production early this month. Behind the quick rise in the first half was a faster-than-expected gain in Iranian oil production and exports.
The oil market has for months been depressed by a vast oversupply.
The IEA said output from non-OPEC producers is expected to fall by 800,000 barrels per day (bpd) in 2016, an acceleration from the agency’s previous forecast for a drop-off of 710,000 bpd. Exports soared more than 40 percent to 2 million barrels a day – near pre-sanctions levels – as the nation worked to regain lost market share. While inventories remain near the highest levels in more than 80 years, investors are taking comfort in the steady decline in USA production.
Global oil demand growth for the first quarter of 2016 was revised upwards to 1.4 million barrels per day, led higher by strong gains in India, China and, more surprisingly, Russia.
In Canada, devastating wildfires near Fort McMurray forced a production curb early this month, which, the IEA said, would result in oil supplies falling to just over 3.7 million barrels a day in May, almost 1 mb/d less than at the start of the year.
In the United States, crude-oil stockpiles defied analysts’ expectation by dropping by 3.4 million barrels in the week ended May 6, according to the Energy Information Administration.
Iran pumped 3.56 million barrels a day in April, the most since November 2011 when global sanctions related to its nuclear program started to tighten, the agency 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”.
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The resurgence of US producers will likely prompt other producers – especially those in the Organization of the Petroleum Exporting Organization – to keep pumping at top speed, further exacerbating the global glut and wiping out any likelihood of a collective output cap at the next OPEC meeting in June.
