The IEA, which coordinates energy policies of industrialised nations, said it now believed non-Opec output would fall by 750,000 barrels per day (bpd) in 2016, compared with its previous estimate of 600,000 bpd. US production is forecast to decline by 530,000 bpd this year, it said.
“There are clear signs that market forces… are working their magic and higher-cost producers are cutting output,” the IEA said.
There has been an oversupply of oil from booming US output in recent years, thanks to the spread of fracking.
Meanwhile, members of the oil-producing cartel Opec have been reluctant to cut supply in order to “put a floor” under the the oil price, for fear of losing market share against higher-cost producers. These two factors sent oil prices tumbling at the end of 2014 and throughout 2015.
Lower demand for oil from China, the world’s second-largest consumer of commodities, has also hurt oil prices and prompted fears of a global economic slowdown.
Many of the major oil firms have reported dramatic falls in profits and cut back billions of pounds in investments in exploration, while at least 5,000 jobs have been lost in the North Sea oil industry over the last 18 months.
Prices hit a 12-year low in January, but have since recovered to about $40 per barrel after leading Opec nation Saudi Arabia and top non-Opec producer Russia said they could freeze output.
The IEA said inventories in industrialised member countries of the Organisation for Economic Co-operation and Development (OECD) had declined in February for the first time in a year, although crude in floating storage increased.
It said it expected demand to be flat in the US, the world’s largest consumer of oil, this year. And it said demand could weaken “if prices maintain their recent upward momentum”.
Demand in China was forecast to grow by 330,000 bpd this year, well below the 10-year average of 440,000 bpd.
“We expect India and other smaller non-OECD Asian economies and the Middle East to provide most of the 2016 growth. The foundations for global demand growth are sound, but not rock-solid,” the IEA said.
Source: BBC News Online
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