International Energy Agency: 'Light at the end of tunnel' for oil production

Oil prices might have bottomed out as production declines in the US and other non-Opec producers accelerate and an increase in Iranian supply has been less than dramatic, said the International Energy Agency.

After a spectacular 2015, growth in global demand was slowing with India and the Middle East being rare pockets of improvement, said the agency, which co-ordinates energy policies of industrialised nations.

Growth could slow even further if oil prices kept rising. Oil prices hit their lowest since 2003, below $30 (€26.89) a barrel, in January on a supply glut stemming from booming US output in recent years and a decision by Opec to ramp up supply to fight for market share against higher-cost producers.

Prices have since recovered to $40 after the Opec leader, Saudi Arabia, and top non-Opec producer Russia, said they could freeze output.

The agency said low oil prices were beginning to take a toll on high-cost production and it believed non-Opec output would fall by 750,000 barrels per day in 2016, compared to its previous estimate of 600,000 barrels.

US production alone would decline by 530,000 daily barrels this year, it said.

“For prices there may be light at the end of what has been a long, dark tunnel, but we cannot be precisely sure when in 2017 the oil market will achieve the much-desired balance. It is clear that the current direction of travel is the correct one, although with a long way to go,” the agency said.

It kept its estimate for 2016 growth in global oil demand unchanged at 1.17m barrels a day, or 1.2% of the total 95.8m barrels.

Reuters