The International Energy Agency warned on Wednesday that large oil inventories are posing a threat to recent price stability.
In its monthly Oil Market Report, the agency said global oil supplies rose by 600,000 barrels per day to 96 million barrels per day in June as outages curbed both OPEC and non-OPEC supplies in May.
“In mid-summer 2016, although market balance is upon us, the existence of very high oil stocks is a threat to the recent stability of oil prices,” the agency said.
World oil production was down 750,000 bpd year-over-year as higher OPEC output “only partially offset” non-OPEC production declines.
The agency expects non-OPEC supplies to fall by 900,000 bpd to 56.5 million bpd in 2016 and then climb by 200,000 bpd in 2017.
OPEC crude output increased by 400,000 bpd in June to an eight-year high of 33.21 million bpd.
That total includes output from newly re-joined OPEC member Gabon.
Saudi Arabia ramped up output to a near-record rate of 10.45 million bpd and flows from Nigeria “partially recovered” following a wave of militant attacks, the agency said.
OPEC’s total output rose by 510,000 bpd year-over-year thanks to producers in the Middle East sustaining “record levels” of output.
OECD commercial inventories grew by 13.5 million barrels in May to end the month at a record high of 3.074 billion barrels.
The IEA said that preliminary information for June suggests that OECD stocks added another 900,000 barrels.
Floating storage levels are also expected to continue building in June and reach their highest level since 2009.
May global refinery throughput fell by almost 1 million bpd from April.
Outages in several regions pushed global refinery throughput down 1.5 million bpd year-over-year in May, the IEA said.
That decline prompted the IEA to lower its second quarter 2016 estimate for global refinery intake to 78.5 million bpd, the first year-over-year drop in three years.
The agency is forecasting third quarter 2016 throughput to be “more steady” at 80.95 million barrels per day.
The agency said that, because global crude inventories are still at “such elevated levels,” the crude glut is still acting as a “major dampener” on prices.
Although a projected dip in global refinery runs may help shrink inventories, the agency said there is still a risk that inventories could rise if demand doesn’t post stronger-than-anticipated growth.
“Our underlying message that the market is heading to balance remains on track, but the modest fall back in oil prices in recent days…is a reminder that the road ahead is far from smooth,” the agency said.