Despite the higher output from the 12-country OPEC group, the IEA noted that falling non-OPEC supply and rising demand could cause oil stock growth to decline in the latter half of the year helping the supply and demand dynamic – and crucially, oil prices – to return to a more stable footing.
"The net result of our changes to demand and supply data is that we expect to see global oil stocks increase by 1.3 million barrels a day (mb/d) in the first half of 2016, followed by a dramatic reduction in the second half of 2016 to 0.2 mb/d."
The IEA's Oil Industry and Markets Head Neil Atkinson told CNBC on Thursday that the expected decline in the growth of global oil stocks pointed towards a rebalancing in markets.
"The point being that we have the direction of travel towards balance and a big factor in the change in the stock-build picture between the two halves (of the year) is the major fall-off in production in the non-OPEC countries as a whole."
"The market is very forward-looking and as it looks through the second half of 2016 and into the early part of 2017 there is a growing expectation that the market will, if not actually balance, certainly get very close to balance."
Before investors got too excited, however, Atkinson stressed that global oil stocks remained "enormous" and would time to run-down.
"The problem we've got is that if you want to see higher oil prices in the rest of 2016, what you need to remember is that oil stocks are at very, very high levels – even if they're going to grow by a very small amount compared to what we've seen and they're not likely to start falling until 2017. So there's a big buffer or big dampener on prospective rise in oil prices by the fact that these enormous stocks do exist and will exist for some time to come," he said.
The IEA noted that oil stocks in the OECD (the Organization for Economic Co-operation and Development, which includes most European nations, Australia and the U.S.) declined for the first time in a year in February, lending support to the view that "the global supply surplus of oil will shrink dramatically later this year."
In terms of demand, the IEA left its outlook for global oil demand growth in 2016 at a "solid" 1.2 mb/d, unchanged from last month. But it said that revised first-quarter data showed demand growing faster at 1.4 mb/d, "in spite of the northern hemisphere winter being milder than usual."
"This strong (first quarter of 2016) performance might raise expectations that demand will remain at this stronger level causing us to raise our average figure for 2016," it said, although it noted recent International Monetary Fund forecasts in April, in which the lending agency revised down its expectations for global gross domestic product (GDP) growth in 2016 from 3.4 percent to 3.2 percent.
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Interestingly, it said India was the "star performer" in terms of oil demand growth. Oil demand from the rising Asian powerhouse was 400,000 barrels a day higher in the first quarter from the same period last year, "representing nearly 30 percent of the global increase" in demand.
It said that it will publish a detailed forecast for 2017 in next month's report, "thus providing clarity on when the oil market could reach its much-anticipated balance."