Global oil markets will “move close to balance” in the second half of the year as lower prices take their toll on production outside Opec, the International Energy Agency said.
The world surplus will diminish to 200,000 bpd in the last six months of the year from 1.5mn in the first half, the agency said in a report yesterday. Production outside the Organisation of Petroleum Exporting Countries will decline by the most since 1992 as the US shale oil boom falters. The glut is also being tempered as Iran restores exports only gradually with financial barriers to sales persisting even after the lifting of international sanctions.
“There is no doubt as to the direction of travel for the supply-demand balance,” the Paris-based adviser to industrialised nations said. “There are signs that the much-anticipated slide in production of light, tight oil in the US is gathering pace.”
Oil prices, which sank to 12-year lows in January amid a global surplus, have climbed 30% in the past two months as Opec and Russia work on a plan to limit their crude production. Still, without any proposal to reduce supply, there will be little real impact from the accord, due to be finalised in Doha this weekend, the IEA said. 
The latest outlook represents a shift for the agency, which as recently as February raised its estimates of the global surplus and warned that the potential for further price losses had intensified. The prospect of markets re-balancing before year-end is gaining traction among analysts, with Credit Suisse Group predicting on Wednesday that stockpiles will contract in the third quarter.
Supplies outside Opec will decline by about 700,000 bpd this year to an average of 57mn a day. While US shale output “has been more resilient to lower prices and the drop in drilling activity than expected,” there’s growing evidence “that output declines are accelerating,” the IEA said. The nation’s crude production fell below 9mn bpd last week for the first time in 18 months, the Energy Information Administration reported on Wednesday.
The IEA, which said last month it may lower oil demand forecasts amid slowing economic activity, said it remained confident that world fuel consumption will increase by 1.2mn bpd in 2016, or 1.2%. India is close to surpassing China as “the main engine of global demand growth,” according to the agency.
Opec continues to pump about 1.2mn bpd more than the average required in the first half of the year, the report showed. The group’s 13 members produced 32.47mn bpd in March, a decrease of 90,000 a day from February because of disruptions in Nigeria, the UAE and Iraq.
Iran, which saw three years of oil sanctions lifted following a deal on its nuclear programme in January, has boosted output 400,000 bpd since the start of the year to 3.3mn. Still, ongoing financial sanctions mean the pace of its return is “more measured than some expected,” the IEA said. Page 3


Little impact on oil supplies if Doha deal struck: IEA


An agreement by producing countries to freeze crude production at the Doha meeting on Sunday would have a limited impact on oil flows, the International Energy Agency said yesterday, Bloomberg reported.
Opec and non-Opec countries - including Russia and Saudi Arabia, the world’s two biggest crude producers - will meet in Doha on April 17 in a bid to freeze production at January levels. A deal would represent the first attempt at coordinating oil production between the Organization of Petroleum Exporting Countries and producers outside the group in 15 years.
Yet the IEA sees scant impact on physical oil flows if a deal is struck.
“If there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited,” the IEA said in its monthly report. Part of the reason is that Saudi Arabia and Russia are “already producing at or near record rates,” and “very little upside” is seen apart from Iran, which is aiming to recover lost market share after sanctions on its nuclear programme were lifted in January. “Any deal struck will not materially impact the global supply-demand balance during the first half” of this year, the IEA said.
Speculation about the Doha meeting has, however, contributed to recent support for oil prices, the IEA said. Prices have gained more than 35% since the first mention of a potential cooperation to freeze output between Saudi Arabia and Russia on February 16.