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Image courtesy of Oil Industry News/Wikimedia Commons.

The International Energy Agency said on Friday that easing global production and a recent crude price rally may suggest that crude prices have finally bottomed out.

In its monthly oil report, the agency said global oil supplies eased by 180,000 barrels per day in February to 96.5 million barrels per day on lower OPEC and non-OPEC output.

However, production levels in February still stood at 1.8 million barrels per day above year ago levels, with the slight dip in non-OPEC production being “more than offset” by OPEC gains.

Non-OPEC production in 2016 is now estimated to fall by 750,000 bpd  to 57 million bpd, up from the agency’s estimate of a 600,000 bpd decline last month.

OPEC crude oil production eased by 90,000 bpd in February to a “still-robust” 32.61 million bpd with losses from Iraq, Nigeria and the United Arab Emirates being partly offset by a “substantial rise” in flows from post-sanctions Iran.

Iran added fewer barrels than anticipated in February, with production growing by 220,000 barrels per day.

The agency now expects Iran’s production ramp up to be “gradual” despite pledges from Iranian politicians to add at least 500,000 bpd of production in the short-term.

Saudi Arabia, OPEC’s largest producer, held supplies steady.

The agency said that although global crude prices have crept back up to about $40 per barrel in recent weeks the price bump “should not… be taken as a definitive sign that the worst is necessarily over.”

However, the agency added that “there are signs that prices might have bottomed out.”

The report said “sharp” decelerations in demand growth, particularly in the United States and China, pulled global growth down to a one-year low of 1.2 million bpd in the fourth quarter of last year compared to year ago levels.

That level was also “dramatically below” the near five-year high of 2.3 million bpd in the previous quarter.

The IEA now expects demand to grow by about 1.2 million bpd for 2016.

OECD commercial inventories gained 20.2 million bpd in January while forward demand cover remained “comfortable” at 32.7 days.

Preliminary data suggest that OECD inventories booked a draw in February for the first time in a year while volumes of crude held in floating storage increased.

The agency expects global oil and product stocks to grow by about 1.5 to 1.9 million bpd in the first half of 2016 with stock growth slowing to 0.2 million bpd in the second half of the year.

Global refinery throughputs are estimated at 79.1 million bpd in the current quarter, reflecting “weak OECD refinery throughput” and a shift of peak spring maintenance to this quarter.

Annual growth in the fourth quarter of last year fell to below 1 million bpd amid product stock builds and was in line with a slowdown in global oil demand growth.

“There are signs that prices might have bottomed out …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 report said.