While oil prices have "recovered remarkably" in recent weeks, this should not "be taken as a definitive sign that the worst is necessarily over," the International Energy Agency (IEA) warned Friday.
"Even so, there are signs that prices might have bottomed out," the IEA said in its latest monthly report published on Friday echoing oil markets which have seen a recovery in recent weeks on the back of a weaker dollar which helps to fuel demand.
"For prices there may be light at the end of what has been a long, dark tunnel, but we cannot be precisely sure when in 2017 the oil market will achieve the much-desired balance," the IEA cautioned.
"It is clear that the current direction of travel is the correct one, although with a long way to go. Without an increase in demand expectations, high-cost oil suppliers will continue to bear the brunt of the market-clearing process."
On Friday, benchmark Brent crude futures were trading at $40.81 a barrel (up from the $32.80 a barrel last month when the IEA published its report). U.S. crude was also higher, at $38.69 a barrel.
At the start of the year, prices tumbled to around $26 a barrel as supply continued to outstrip demand. But there are signs that prices could have finally bottomed out, the IEA said. These included: "possible action by oil producers to control output; supply outages in Iraq, Nigeria and the United Arab Emirates; signs that non-OPEC supply is falling; no reduction in our forecast of oil demand growth; and recent weakness of the US dollar."
The IEA maintained its forecast for global oil demand growth for 1.2 million barrels a day (mb/d) in 2016, unchanged from last month. It said there had been a "sharp deceleration in demand growth in the three months to March, particularly in the US and China.