Oil Price Bottom May Have Been Reached, Production Could Slow Further: IEA

IEA says a market balance will be achieved sometime in 2017.

Data from the latest International Energy Agency report suggests that oil prices may have finally bottomed out, and that production growth – which is slowing globally – could slow even further if prices keep rising.

In reporting that U.S. production will decline by 530,000 barrels per day (bpd) and non-Organization of the Petroleum Countries (OPEC) output in general would fall by 750,000 bpd in 2016, the IEA stated that "There are clear signs that market forces ... are working their magic and higher-cost producers are cutting output."

As for Iran's much-feared return to the market, IEA says it  "has been less dramatic than the Iranians said it would be; in February we believe that production increased by 220,000 bpd and, provisionally, it appears that Iran's return will be gradual."

Chinese demand, meanwhile, will experience growth of only 330,000 bpd this year, compared to the 10-year average of 440,000 bpd.

The IEA expects only India, smaller Asian economies, and the Middle East to provide most of the 2016 growth: "The foundations for global demand growth are sound, but not rock-solid."

IEA also reported that inventories in industrialized OPEC member countries declined in February for the first time in a year, but crude in floating storage increased.

These and other factors caused the IEA to state, "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."

Last month the IEA in its annual Medium-Term Oil Market Report predicted that the global market will begin to rebalance next year and that by 2021 the U.S. and Iran will lead production gains amongst non-OPEC and OPEC countries, respectively.