After a relative glut on oil markets at the beginning of the year, and the downward impact on oil prices, the International Energy Agency (IEA) said on Wednesday that the market balanced itself out in the second quarter of 2016 and this has continued into the summer period.
This has principally led to oil prices recovering above USD 50 per barrel and settling now in the high USD 45-50 range.
"The adjustments to our data this month suggest that little has changed with the market showing an extraordinary transformation from a major surplus in 1Q16 to near-balance in 2Q16," the Agency wrote.
In its latest monthly Oil Market Report (OMR), the IEA said, however, that the very high level of stocks being held currently could present a risk if demand does not continue to grow.
"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 IEA says.
It notes that later in the year "we may well see crude oil stocks fall back but there is a risk that, unless demand turns out to be stronger than we currently anticipate, products stocks could rise still further and threaten the whole price structure." At the same time, demand growth does appear to be rising, according to the OMR, aleit modestly.
"Estimates of global demand for 2016 have been raised by 100,000 b/d since last month's Report," and average demand should reach 96.1 million b/d, "an upgrade largely attributable to Europe's resilience." Demand growth this year should be approximately 1.4 mb/d and in 2017, global demand is forecast to rise by a further 1.3 mb/d to 97.4 mb/d. The bulk of the demand increase next year should come mainly from non-industrialised countries, principally India, followed by China and other countries in Asia.
On the supply side, the OMR indicated that global output in June rose by 600,000 b/d to 96.0 mb/d but this is still 750,000 b/d lower than at the same time in 2015. In June, OPEC output is estimated to have risen by 400,000 b/d to an eight-year high of 33.21 mb/d, due to Gabon rejoining and also because of higher Saudi output.
Inventories held by the industrialised OECD countries rose to a record level as of May, reaching 3.074 billion barrels, with more being added, according to the report.