Thursday 12 May 2016 10:04 am

IEA: Global oil oversupply to shrink "dramatically" this year

The International Energy Agency expects the global oversupply of oil to shrink "dramatically" this year.

In its monthly report released today, the IEA said: "We note that OECD stocks grew in first quarter of 2016 at the slowest pace since last quarter orf 2014 and in February they declined for the first time in a year."

Read more: Opec's June meeting is likely to be another dud

"This lends support to our view that the global supply surplus of oil will shrink dramatically later this year."

The IEA expects output from non-Opec producers to fall by 800,000 barrels per day (bpd) this year, more than its previous forecast for a drop-off of 710,000 bpd.

This will help global oil stocks drawn down to 200,000 barrels per day in the last six months of 2016, from 1.3m in the first half, it added.

Read more: Opec faced with waning influence in the global oil markets

Brent crude, the global benchmark, was last trading up 0.2 per cent at $47.7 per barrel, while West Texas Intermediate crude, the US benchmark, swelled 0.1 per cent to $46.4.

The higher oil price also breathed life into battered energy shares this morning. Euro Stoxx oil and gas index jumped 1.2 per cent to 281.4 points, while Britain's FTSE 350 oil and gas sector added 0.9 per cent to 341.3 points.