Oil price unlikely to rise much further, global agency says

However, the agency warned this first 2017 outlook may be amended to reflect market developments, which could see large volumes of shut-in production, mainly in Nigeria and Libya, returned to the market, amid weaker demand growth, putting an end to the much-expected supply-demand balance.

In the USA, the rally in oil prices from less than $30 a barrel in February to more than $50 a barrel last week could encourage producers to invest in new drilling, analysts say.

Oil’s 80 per cent rally from a 12-year low in February is faltering on speculation that higher prices will encourage more output and swell stockpiles. OPEC forecasted a more balanced crude oil market in the second half of 2016 in its monthly market assessment report released on Monday. But output fell by 100,000 bpd in May to 32.36 million bpd led by Nigeria, the report said citing secondary sources. But there is plenty of oil flowing into the market with Iran’s exports on track to hit the highest in nearly 4-1/2 years in June, as shipments to Europe recover to near pre-sanctions level, a source with knowledge of the country’s crude lifting plans has told Reuters.

Crude inventories USOILC=ECI fell by 933,000 barrels in the last week, the U.S. Energy Information Administration reported, less than half the 2.3 million barrel decrease expected by analysts. In January, the IEA estimated surplus supplies would reach 1.5 million barrels per day in the first half of this year.

“There is still a massive global supply overhang”, it said. The IEA called it the first “significant” drop in supply since early 2013.

That was followed by news that data from United States industrial group the American Petroleum Institute show USA inventories rose 1.2 million barrels last week, confounding forecasts of a fall.

“There are some that think that the recent recovery in prices is due to temporary supply issues and not to do with any strengthening demand on the back of a robust global economy”, Kapadia said.

Futures fell as much as 1.6 per cent in NY after settling at the lowest since May 23 on Tuesday (June 14).

However, OPEC said solid economic growth across the world, despite a weak start to the year, was likely to underpin future oil demand.