SHARE
IEA executive director Fatih Birol. Image courtesy of Dean Calma / IAEA.

The head of the International Energy Agency (IEA) said on Sunday that oil price volatility is likely to persist into 2017.

IEA executive director Fatih Birol told Reuters that oil markets will see “much more volatility” this year even if OPEC and non-OPEC members deliver on production cut plans.

OPEC members agreed late last year to cut the group’s overall production down by about 1.2 million to about 32.5 million barrels per day.

A group of non-OPEC producers, including Russia, also agreed to trim their overall production by 558,000 last month.

Both production cut plans were effective at the start of the year and will be in place for an initial six moth period.

Birol said he currently expects oil markets to rebalance during the first half of 2017.

The IEA said last month that if OPEC and non-OPEC members deliver on the cuts the oil market is “likely to move into deficit in the first half of 2017” by an estimated 600,000 barrels per day.

The IEA also warned that underlying uncertainties in the oil market and the global economy, means that there is no guarantee that the production restraint will be extended.

“The price curve reflects this with a sharp increase in short-term prices but shows relatively little movement further out,” the IEA said last month.

While the production cuts are expected to boost oil prices, Birol told Reuters that rising prices could encourage U.S. shale producers to grow production.

“I expect the U.S. shale oil will go back to increasing production this year,” Birol told Reuters.

Those comments are in line with a recent forecast from the U.S. Energy Information Administration that sees U.S. oil production growing into 2018.

The EIA said earlier this month that it expects U.S. crude production to average 9 million bpd in 2017, up from its previous estimate of 8.7 million bpd.

The agency has forecast that U.S. crude production will then climb to 9.3 million bpd in 2018 thanks to production gains in the Gulf of Mexico.

Birol also warned that declining investment levels caused by two year of low oil prices could place pressure on supply levels in the coming years.

“This year, if there are no major investments coming we may well see in a few years from now significant supply-demand gap with serious implications on the market,” Birol told Reuters.