Oil demand growth seen slowing for a second year

Oil demand growth seen slowing for a second year

Oil demand growth seen slowing for a second year

In a monthly report released Wednesday, OPEC said its output continued to fall in March, but the cartel raised its 2017 forecast for supply growth in the U.S.by 200,000 barrels a day.

Prices were boosted after the IEA said production cuts by major exporters offset a longer-term decline in global demand.

The IEA projected the oil market would likely tighten throughout the year as non-OPEC oil production, not just in the USA, is forecast to increase once again.

Then in December, non-OPEC producers led by Russian Federation agreed to cut their own output to 558,000 barrels per day.

The rebound in US oil output has threatened to derail efforts by the world's largest exporters aimed at reducing a global supply glut and rebalancing the market.

Prices had been nearly unchanged earlier in the day as concerns over rising USA production offset support from data showing the first weekly drawdown in US oil inventories in a month.

While output curbs by nations including Saudi Arabia and Russian Federation have bought markets "very close to balance", stockpiles still climbed because of supply increases before a six-month deal between the producers took effect January 1, the IEA said in its monthly report.

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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 production will grow again on a year-on-year basis by May.

The net result is that global stocks might have marginally increased in 1Q17 versus an implied draw of about 0.2 mb/d. New data shows weaker-than-expected growth in a number of countries including Russia, India, several Middle Eastern countries, Korea and the United States, where demand has stalled in recent months.

Brent for June settlement rose 3 cents to $55.89 a barrel on the London-based ICE Futures Europe exchange.

With the increasing rig count pointing to rising supply, Tony Headrick, energy market analyst at CHS Hedging, said OPEC would be watching.

The combination of factors could keep a lid on oil prices, which have risen in the past six months after a three-year slump.

"Even at this mid-way point, we can consider what comes next" to the output deal, the IEA says.

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