A recent rebound in oil prices may be short-lived, the International Energy Agency has warned, with another sharp fall possible due to unabating US output and in spite of higher demand projected for later this year.
In its monthly report released Friday, the International Energy Agency (IEA) said steep drops in the United States rig count had been the "key driver" of a recent recovery in oil prices, which had seen crude prices increase to $60 (56 euros) per barrel after falling as low as $46 in January.
IEA warned, however, that the actual US supply was showing "precious little sign of slowing down," causing non-OPEC production in February to increase by about 270,000 barrels per day (bpd) over January.
As US oil production was continuing to "defy expectations," IEA said: "Behind the façade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly."
The Paris-based energy watchdog believes that the United States may soon run out of spare capacity to store crude, leading to more oil on markets and additional downward pressure on prices. This process would last until the second half of 2015, when US production was expected to start abating, IEA added.
Little support from higher demand
According to IEA data, the slump in global oil demand bottomed out in the second quarter of 2014 and had since risen steadily. As a result, the organization raised its forecast for 2015 demand growth from 680,000 bdp seen in 2014 to 1 million bpd now. Total oil demand for 2015 is expected to reach 93.5 million bpd.
"Tentative signs of a demand recovery have emerged with the turn of the year, with a heavy emphasis reserved for the word 'tentative'," IEA said.
Moreover, the projected increase was somewhat deceptive, IEA added, because it rested partly on one-off factors such as cold weather and a low point of comparison in the previous year.
The IEA's findings appear set to disappoint the members of the Organization of Oil Exporting countries (OPEC), which decided in November to keep its output stable at high levels in an effort to stifle US oil output and regain market share.
uhe/pad (Reuters, AFP)