The Organisation of Petroleum Exporting Countries, OPEC and the International Energy Agency, IEA, have declared that they expect the oil market to balance in the second half of 2016.
The forecast was declared on Tuesday in the latest monthly report published.
According to them, growth in global oil demand will hit around 1.3 million barrels per day in 2016. While in 2017, they predict to “see the same rate of growth and global demand reach 97.4mb/d”.
IEA said non-OECD (Organisation for Economic Co-operation and Development) nations will provide most of the expected gains in both years, adding that “the growth rate is slightly above the previous trends, mostly due to relatively low crude oil prices.”
According to OPEC’s latest monthly report which looked ahead to the second half of 2016, global economic conditions should continue to improve to reach global growth of 3.1 percent, said OPEC.
“Providing that there is a clear picture regarding oil supply and demand, the expected improvement in global economic conditions should result in a more balanced oil market toward the end of the year,” the group said on Tuesday.
On the supply, IEA said that a glut in supply that has caused oil prices to fall since mid-2014 could be going down. In May, outages in OPEC and non-OPEC countries reduced global oil supply by nearly 800, 000 barrels a day last month.
For May, IEA said output was 95.4 mb/d which was 590,000 b/d below the level seen a year earlier- “the first significant drop since early 2013.”
With oil price rising and output reducing, IEA said, “assuming no further surprises in the second half of 2016, we expect the oil market to be balanced, with a small stock draw in the third quarter of 2016 offset by a small stock build in the fourth quarter of 2016.”
The report came as oil markets are showing a tentative if unsettled recovery in which geopolitical concerns are currently dominating price movements rather than an over-supply (and failure of demand to keep up) that caused prices to decline from around $114 a barrel in June 2014 to a low of just below $27 a barrel in January.
Oil prices have been hovering around $50 a barrel for the past three weeks but rising fears over global growth and an impending vote on Britain’s membership of the European Union are rattling oil market this week and prices have slipped as the dollar has edged higher.
In early trade on Tuesday, Brent crude futures fell 38 cents since their last settlement to trade below $50 a barrel at $49.97. U.S. crude was also down 44 cents at $48.44 a barrel.
OPEC’s decision in November 2014 to defend its market share in the face of rival producers rather than the price of oil – which it could have done by cutting production – meant that non-OPEC producers with higher production costs (such as those in the U.S. shale oil industry) were pressured to cut output and production.