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Oil steadies as IEA sees balanced market ahead

by August 11, 2016 General

By Christopher Johnson

LONDON (Reuters) – Oil prices steadied on Thursday after the International Energy Agency forecast crude markets would rebalance in the next few months following several years of heavy overproduction.

The IEA, which advises large developed economies on energy policy, predicted oil stocks would draw in the third quarter of this year for the first time in more than two years.

North Sea Brent crude was up 10 cents a barrel at $44.15 by 1125 GMT. U.S. light crude traded around $41.71 a barrel, unchanged from the previous close, after falling sharply on Wednesday.

“Oil’s drop … has put the ‘glut’ back into the headlines even though our balances show essentially no oversupply during the second half of the year,” the Paris-based IEA said in its monthly report.

“Our crude oil balance indicates a hefty draw in the third quarter after a lengthy stretch of uninterrupted builds.”

Oil prices fell sharply on Wednesday after data from the U.S. Energy Information Administration showed crude inventories rose 1.1 million barrels in the week ended Aug. 5. Analysts polled by Reuters had expected a 1.0 million barrel crude draw.

World oil output has been well above consumption over the last two years, pushing up stocks across the globe at a time when sluggish economic growth has kept a lid on fuel demand.

Production by the Organization of the Petroleum Exporting Countries has been boosted by producers such as Saudi Arabia, Iraq and Iran.

Saudi Arabia has said it pumped a record 10.67 million barrels per day (bpd) of crude oil in July.

OPEC expects demand for its crude in 2017 to average 33.01 million bpd, suggesting a supply surplus of 100,000 bpd if the producer group keeps output steady.

“The market is clearly concerned about oversupply,” said Tamas Varga, analyst at London brokerage PVM Oil Associates.

Many analysts say they see oil prices trading within a range for the next few weeks.

Matt Stanley, a fuel broker at Freight Investor Services in Dubai, said he expected crude prices to “be stuck in a range between $40 and $45 (per barrel) for a while”.

(Additional reporting by Henning Gloystein in Singapore; editing by Susan Thomas and Susan Fenton)