The International Energy Agency said there are clear signs of improvement in the oil market.
In its monthly oil report, the Paris-based intergovernmental organisation, the main energy think tank for the largest economies, said “there is no doubt as to the direction of travel for the supply/demand balance”.
Despite a recent rally oil is still suffering from a fall of more than 70 per cent in price over the past 18 months.
Oil demand has been lacklustre over the past couple of years, but the main issue for the world oil market has been oversupply. The IEA said the sharp slowdown in production growth – especially shrinking production in the US shale oil sector – has slowed down growth in world oil inventories.
“After big build-up of stocks in the first half of 2016 of 1.5 million barrels per day, the surplus will fall to 200,000 bpd in both the third and fourth quarters,” the IEA forecast.
The agency said that by early April, the rig count in the US – an indicator of drilling and production activity – was down about 80 per cent from peak in autumn 2014.
“Within the group of non-Opec producers there are few areas of growth, with only a handful of countries likely to increase production this year, unless Russia, which has surprised us all with continued growth in production, does not carry out its professed support for a production freeze,” the IEA said.
Russia’s energy minister, Alexander Novak, said on Wednesday in Moscow that he is “optimistic” that an agreement can be reached in Doha on Sunday when ministers from 17 of the world’s largest producers will meet – including Saudi Arabia, Russia, Venezuela and the UAE.
However, he also said “the agreement will not be very rigidly formulated, it is more of a gentlemen’s agreement”, according to news wires, citing a spokesman for Mr Novak.
Although talk of a Doha deal has helped to underpin oil prices in the past couple of months, there is a widespread sense that the meeting – which will not include Iran, whose production has increased more than any other producer’s this year as nuclear-related sanctions were lifted – is more of a symbolic gesture.
The IEA said that within Opec, “the pace of Iran’s return to the market is more measured than some expected but production in March was still nearly 400,000 bpd higher than at the start of the year”.
It said that some financial sanctions remain in place, making it difficult to finance trade and access some markets.
Although noting the downbeat forecasts earlier this week by the IMF for world economic growth, the IEA “remained confident that in 2016 global oil demand will grow by 1.2 million bpd”, slowing from last year’s 1.8 million bpd.
The IEA said that “India could be replacing China as the main engine of global demand growth”.
The latest available numbers show that for last year and early this year, India’s oil demand growth surpassed 8 per cent year-on-year.
The IEA forecast that for this year, India will have its strongest-ever growth of about 300,000 bpd on average.
“Reforms to the rules allowing refiners to directly import crude oil are all part of a general trend towards liberalisation that should underpin India’s growth momentum,” the IEA said.
India is a target for investment by both the UAE and Saudi Arabia, both of which sent top-level diplomatic trade delegations there earlier this year and received the Indian prime minister, Narendra Modi.
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