The recent easing of prices may be relatively short‐lived, the International Energy Agency said on Thursday, as demand picks up and production problems in Libya and Iraq continue to weigh on supply.
Oil prices have staged a spectacular reversal since their summer rally, a move the IEA attributed to Middle East politics as well as seasonal swings in supply and demand. The agency said prices initially surged along with rising concerns about potential western military strikes on Syria, which at one point seemed imminent. They are currently trading at around $107 per barrel.
Their decline started when a deal with Syria dispelled those fears in early September, and accelerated amid rising hopes of a breakthrough in negotiations between Iran and the five permanent members of the UN Security Council plus Germany.
Prices were were likely to remain volatile, the IEA said.
"European oil demand is showing signs of life, in line with underlying economic data depicting that the euro zone officially came out of recession in the second quarter of 2012," the IEA said in its monthly oil market report.
Later on Thursday, investors will focus on a Senate committee hearing with Janet Yellen who is likely to be the next chair of the Federal Reserve and any clues she might gove on any tapering of the Fed's bond-buying scheme.
The agency said production problems in Libya and Iraq, among others, continue to "relentlessly fester".
"Given proverbial uncertainties about the weather and geopolitics, the market might not be at the end of its rollercoaster ride," the IEA said.