Oil prices could begin to trend upwards, as high cost US shale gas producers halt production and Iran makes an unexpectedly slow return to the market, the International Energy Agency (IEA) said today.
The IEA now expects non-Opec output will fall by 750,000 bpd this year, more than its previous estimate of 600,000 bpd. US production alone would decline by 530,000 bpd in 2016.
Oil prices are up nearly 50 per cent from a historic low of $27 per barrel earlier this year, as US shale gas production begins to tail off and other big oil producers consider freezing output at January levels.
"There are clear signs that market forces ... are working their magic and higher-cost producers are cutting output," the Paris-based IEA said.
Meanwhile, oil output from Opec fell by 90,000 bpd last month due to outages in Nigeria, Iraq and the UAE.
"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," the IEA said.