OPEC also forecast on Monday that the world oil market would be more balanced in the second half of 2016 as outages in Nigeria and Canada help to speed up the erosion of a supply glut.
It said supply outside OPEC dropped 0.9 million barrels per day, larger than estimated along with supply disruptions in Nigeria and Canada have pushed market closer to balancing in second half of the year. West Texas Intermediate, the US benchmark price for oil, was 0.7 percent below the previous close to $48.50 per barrel.
The IEA added in the report that there is a “huge number of moving parts” in the current oil market environment, making accurate predictions hazardous.
The demand for oil this year grew by 400,000 barrels per day more than initially expected, fueled first by use in India and now by American drivers.
United States crude fell to a three-week low of $47.55 as the contract dropped for a fifth day.
The Paris-based adviser to OECD nations on energy issues said its original forecast of a surplus of 1.5 mb/d had been revised down by nearly a half to 0.8 mb/d for the first half of 2016, although that still represents a significant build-up of oil stocks.
Oil has surged about 85 percent from a 12-year low in February as the global glut is trimmed by disruptions and a slide in US output, which is under pressure from the Organization of Petroleum Exporting Countries’ policy of pumping without limits.
The IEA’s latest demand estimate for the first three months of this year shows global oil deliveries rising by 1.6 million bpd to 95.2 million bpd, with nine out of every 10 extra barrels going to a non-OECD economy. “The growth rate is slightly above the previous trend, mostly due to relatively low crude oil prices”, it noted. While U.S. shale oil production will start to recover by the middle of next year, average output for 2017 will be 190,000 barrels a day lower, after falling 500,000 a day in 2016.
Front-month USA crude futures CLc1 were down 39 cents, or almost 1 percent, at $47.62 a barrel at 0142 GMT. USA rig counts have increased in the last two weeks, however, raising concern that supplies may grow and pressure prices again.