Global oil market very close to balance, IEA says

The global oil market is "very close to balance" and will likely tighten throughout the rest of the year, the rich-world's energy watchdog said in a widely watched report.

In its monthly Oil Market Report for March, the International Energy Agency says that OPEC's "impressive" degree of compliance with the output cuts that it agreed upon last November lowered the cartel's level of production by 365,000 barrels a day in March to 31.68m b/d, led by reduced output in Nigeria, Libya (both exempt from the OPEC deal) and Saudi Arabia.

Over the whole of the first quarter, output from OPEC ran at 31.9m b/d, which was 240,000 barrels a day less than the first quarter 2017 'call' on its crude, thus detracting from the inventories that were piling up around in OECD countries following a surge in production in January.

The call on OPEC was set to reach 32.9m b/d in the second quarter the IEA said, so if the group sticks by its pledges then global stocks of oil will continue to fall.

Furthermore, demand for oil from refineries was set to rise sharply in the between March and July, by 3.5m b/d.

However, the IEA now expects global oil demand to grow a bit more slowly over the course of 2017, by about 1.3m b/d, which is down from the 1.4m b/d increase seen in its previous forecast.

In parallel, US supply growth is now seen reaching 680,000 b/d by year-end versus when compared with output levels for end-2016, more than the IEA had been expecting, and firmer oil prices would only provide further encouragement to American outfits to raise their levels of output.

"Even at this mid-way point, we can consider what comes next. It is of course OPEC's business to decide on its output levels, but a consequence of (hypothetically) extending their output cuts beyond the six-month mark would be bigger implied stock draws. This would provide further support to prices, which in turn would offer further encouragement to the US shale oil sector and other producers."