In its monthly report, the IEA said that in the first quarter of 2017 the oil market was almost balanced as global inventories still don't reflect the impact of OPEC supply cuts.
IEA said that the global demand growth was unchanged for 2017 at 1.3 million bpd but growth was weaker with big downward revisions in the U.S. It said that it has taken some time for stocks to reflect lower supply when volumes produced before output cuts by OPEC and eleven non-OPEC countries took effect are still being absorbed by the market.
"In 1Q17, we might not have seen a resounding return to deficits but this Report confirms our recent message that re-balancing is essentially here and, in the short term at least, is accelerating," the IEA said in its monthly report.
Global oil supply fell by 140,000 bpd in April to 96.17 million bpd, led by declines in nations outside the Organization of the Petroleum Exporting Countries, such as Canada. The overall outlook for the non-OPEC countries, eleven of which are voluntarily cutting production to support OPEC, shows growth in 2017 of nearly 600k bpd, an increase on the 490k bpd seen in IEA's last month’s report.
OPEC crude production rose by 65k bpd in April to 31.78 million bpd as higher output from Nigeria and Saudi Arabia more than offset lower flows from Libya and Iran.
In its report, the IEA said: "While compliance with the agreed production cuts by OPEC and the eleven non-OPEC countries has generally been strong, we need to keep a close eye on Libya and Nigeria where there are signs that production might be rising sustainably. According to preliminary data, Libyan production reached 800 kb/d in May, the highest level since 2014, and any significant increase clearly offsets cutbacks by other OPEC and non-OPEC countries."
The IEA added that if OPEC maintained output at April's 31.8 million bpd, and nothing changed elsewhere in the balance, there would be an implied global draw of 700,000 bpd in the second quarter.
The IEA commented on U.S. crude production saying that in February, it increased again, this time by nearly 200k bpd and, at 9.03 million bpd, was the highest since March last year.
"After bottoming out in September, output has increased by nearly 465k bpd. In line with stronger recent performance from the U.S. shale sector we have revised upwards our expectation throughout 2017 and we now expect total US crude production to exit the year 790k bpd higher than at the end of 2016, which is an upward revision of 100k bpd since last month’s report," the IEA stated.