IEA sees bottom for oil prices as supply glut eases

Oil prices appear to have bottomed out after output from OPEC and non-member producers eased in February, while Iraq, Nigera and the UAE saw supply disruptions, International Energy Agency (IEA) said in a monthly report.

Global oil supply eased by 180,000 barrels per day (bpd) in February, to 96.5 million barrels per day (mbd) on lower OPEC and non-OPEC output.

Meanwhile, Iran's return to the market earlier this year was considered to be less dramatic than previously thought.

The agency revised its forecasts for non-OPEC output, which is now projected to fall by 750,000 bpd this year, compared to the previous estimate of 600,000 bpd. US crude production is also expected to fall by 530,000 bpd during the same period.

Oil prices have hit three-month highs in recent weeks. Global benchmark Brent crude is currently trading around $40 bbl, compared to $28.5 bbl in mid-January. 

The IEA says higher oil prices will likely be supported by many factors, including supply outages in Iraq, Nigeria and the UAE, as well as signs that non-OPEC supply is falling.

In addition, some oil producers are expected to meet later this month to discuss a possible output freeze; but any agreement will unlikely affect the supply-demand balance substantially during H1-2016.

The Paris-based agency left its estimate for global oil demand growth unchanged at 1.2 mbd in 2016, as it expects demand in the US and China to remain mostly flat, while India and other non-OECD Asian countries will likely account for most of the growth.

"For the first half of 2016, the implied surplus of supply over demand remains high at 1.9 mbd in Q1 and 1.5 mbd in Q2," the IEA said. "To the extent the oil price is forward-looking, comfort will be taken from our view that in the second half of 2016 the gap between supply and demand narrows significantly to 0.2 mbd in both Q3 and Q4," it added.

Write to Joumana Saad at joumana.saad@argaamplus.com