Key highlights from IEA oil market report

International Energy Agency (IEA), developed nations’ watchdog over oil market warned on the market balance and high level of stocks in its monthly report. It said that the supply and demand in the market are closer to balance, however, high level of stocks are a threat to price stability. It said that the market made an extraordinary transformation this year from a big surplus at the beginning of the year to nearly achieving balance by the second quarter.

In recent months IEA has been revising its outlook for demand higher but in this report, the agency has suggested ease in the momentum. In the previous report and in the one before IEA lifted the demand growth outlook to 1.4 million per barrel in 2016, however, in this report it has reduced it to 1.3 million barrels per year. It forecasts demand to be 97.4 million barrels by the end of 2016.

On the supply side, IEA said that supplies rose by 600,000 barrels per day in June, which is due to recovery from the large drop in May caused by outages. However as per the agency, global production is down 750,000 barrels per day from a year back. Non-OPEC supply is expected to decline by 09 million barrels per day this year. While supply is dropping outside OPEC, Middle East supplies rose to 31.5 million barrels in June and likely to rise further.

The Middle East has increased its global output share to 35 percent, highest since the 70s.

Brent is currently trading at $47.7 per barrel, at $1.5 barrel premium to WTI.