The International Energy agency said Thursday that the oil market is moving “towards balance” despite growing OPEC production.
In the agency’s May oil market report, the IEA said that global oil supplies rose by 250,000 barrels per day in April from the previous month to 96.2 million bpd.
Higher OPEC output in April “more than offset” deepening output declines in non-OPEC countries.
The IEA said those shifts “confirm the direction of travel of the oil market towards balance.”
The IEA now expects global oil stocks to grow by 1.3 million bpd in the first half of 2016.
The agency expects that build will be followed by a “dramatic reduction” in the second half of 2016 to 200,000 bpd.
The agency left its global oil demand growth outlook for 2016 unchanged at 1.2 million bpd.
However, revised first quarter data shows that demand is growing at 1.4 million bpd in spite of a milder than usual winter in the northern hemisphere.
The agency said that, while first quarter performance may indicate that demand will remain strong, economic headwinds prompted it to leave its growth outlook unchanged.
In the first half of 2016, OECD stocks grew at their slowest pace since the fourth quarter of 2014 and posted their fist decline in a year in February.
In March, OECD commercial inventories fell by a 1.1 million barrels.
Preliminary data for April suggests that stocks rebounded while oil held in floating storage rose, the agency said.
“This lends support to our view that the global supply surplus of oil will shrink dramatically later this year,” the IEA said.
Global output grew by just 50,000 bpd in April compared to an increase of more than 3.5 million bpd a year earlier.
The IEA has forecast non-OPEC supplies will fall by 800,000 bpd to 56.8 million bpd this year, up from its previous estimate of 700,000 bpd.
Higher production in Iran, Iraq and the United Arab Emirates helped boost OPEC crude output to 32.72 million bpd in April, a 333,000 bpd month-over-month increase.
Those increases were more than offset outages in Kuwait and Nigeria, the IEA said.
Saudi Arabia’s output held steady at about 10.2 million bpd while Iranian supply climbed to 3.56 million bpd for the first time since November 2011.
Iranian exports also grew slightly faster than expected, growing to 2 million bpd in April from 1.4 million bpd in March.
The agency also found that India is surpassing China to become the main growth market for oil.
Oil demand in India grew by 400,000 year-over-year in the first quarter, accounting for nearly 30 percent of global demand growth.
“Any changes to our current 2016 global demand outlook are now more likely to be upwards than downwards, as gasoline demand grows strongly in nearly every key market, more than offsetting weakness in middle distillates,” the IEA said.