Crude oil eases for 2nd day on rising United States production

Deepwater drilling is back to challenge shale says Wood Mackenzie

In its closely watched monthly oil market report, the IEA said global oil stocks will decline this year if Opec maintains its production cuts with allies like Russian Federation beyond May, potentially supporting prices after the near three-year-long slump.

Non-OPEC producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017 for six months, extendable for another six months.

Oil prices have stabilised in recent weeks and could be boosted further if the cartel chose to extend its output reductions beyond the summer, the Paris-based agency said.

The report also predicted a rebound in oil supply from producers outside of the Opec group.

On the other hand, the Paris-based IEA said on Thursday that it sees the global oil market as close to balancing after a fall in stockpiles in developed countries.

If OPEC decides to extend the production cut deal a further six months during its meeting on 25 May, this would provide further support to oil prices but imply bigger stock drawdowns, the agency said.

"So far, the game has gone fairly well for producers", the IEA says, noting that Opec over-complied last month, as it had in the previous two months, while the others are starting to contribute. This would provide further support to prices, which in turn would offer further encouragement to the United States shale oil sector and other producers.

"Even after taking into account production cut pledges from the eleven non-OPEC countries, unplanned outages in Canada as well as in the North Sea, we expect (non-OPEC) production will grow again on a year-on-year basis by May", the report said.

"The net result is that global stocks might have marginally increased in the first quarter versus an implied draw of about 0.2 million bpd", the IEA said.

"New data shows weaker-than-expected growth in a number of countries including Russia, India, several Middle Eastern countries, Korea and the USA, where demand has stalled in recent months", it said.

Global benchmark Brent futures added 13 cents or 0.25% to trade at $55.99 a barrel on the ICE Futures Exchange in London. "We have an interesting second half to come".

The IEA said it raised its second-quarter demand forecast but cut for the second half of the year.

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