LONDON • Oil prices may have passed their lowest point as shrinking supplies outside Opec and disruptions inside the group erode the global surplus, the International Energy Agency (IEA) said yesterday.
Production outside the Organisation of Petroleum Exporting Countries will decline by 750,000 barrels a day this year, or 150,000 barrels a day more than estimated last month, the IEA said.
Markets are also being supported by output losses in Iraq and Nigeria, and as Iran restores production more slowly than planned following the end of international sanctions.
"There are signs that prices might have bottomed out," the Paris- based adviser to 29 countries said in its monthly market report.
"For prices there may be light at the end of what has been a long, dark tunnel," it added.
Oil prices have recovered 50 per cent from the 12-year lows reached in January as American shale production retreats and as some Opec members led by Saudi Arabia reached a tentative accord with Russia to maintain output at current levels.
This "freeze" deal, while currently supporting prices, is unlikely to have a substantial impact on markets in the first half of the year, the IEA said.
The agency's view on prices is a shift from last month's report, in which it said crude could sink further as the market remained "awash in oil". Brent futures traded at about US$40 a barrel in London yesterday.
The outlook for the balance of supply against demand in the first half is "essentially unchanged" from last month, the IEA said. World oil consumption will increase by 1.2 million barrels a day, helping to reduce the global surplus from 1.7 million barrels a day in the first half to 200,000 a day in the last six months of the year.
The return of Iran, after January's nuclear agreement lifted sanctions on its oil trade, "has been less dramatic than the Iranians said it would be" and further recovery will be "gradual", the agency said.
While the Opec member vowed to restore 500,000 barrels a day as soon as sanctions ended, it instead boosted output by 220,000 barrels a day last month to 3.22 million, the highest in four years.
US production alone would decline by 530,000 barrels per day this year, it said. "There are clear signs that market forces... are working their magic and higher-cost producers are cutting output."
As a result of these factors, inventories in industrialised member countries of the Organisation for Economic Cooperation and Development had declined for the first time in a year, although crude in floating storage increased.
"It is clear that the current direction of travel is the correct one, although with a long way to go," it said.