On the supply side, the IEA signaled that a glut in supply that has caused oil prices to fall since mid-2014 could be dissipating. In May, for instance, outages in OPEC and non-OPEC countries cut global oil supply by nearly 800,000 barrels a day last month.
For May, the IEA said output stood at 95.4 mb/d which was 590,000 b/d below the level seen a year earlier – "the first significant drop since early 2013."
With oil demand growth rising and global oil supply easing, the IEA said that, "assuming no further surprises, in the second half of 2016 we expect the oil market to be balanced, with a small stock draw in the third quarter of 2016 offset by a small stock build in the fourth quarter of 2016."
Tempering that prediction slightly, the IEA noted that although markets look to be rebalancing as of this month "we must not forget that there are large volumes of shut-in production, mainly in Nigeria and Libya, that could return to the market, and the strong start for oil demand growth seen this year might not be maintained."
"In any event, following three consecutive years of stock build at an average rate close to 1 mb/d there is an enormous inventory overhang to clear. This is likely to dampen prospects of a significant increase in oil prices," it said.
The report comes as oil markets are showing a tentative if unsettled recovery in which geopolitical concerns are currently dominating price movements rather than an over-supply (and failure of demand to keep up) that caused prices to decline from around $114 a barrel in June 2014 to a low of just below $27 a barrel in January.
Oil prices have been hovering around $50 a barrel for the past three weeks but rising fears over global growth and an impending vote on Britain's membership of the European Union are rattling oil markets this week and prices have slipped as the dollar has edged higher.
In early trade on Tuesday, Brent crude futures fell 38 cents since their last settlement to trade below $50 a barrel at $49.97. U.S. crude was also down 44 cents at $48.44 a barrel.
OPEC's decision in November 2014 to defend its market share in the face of rival producers rather than the price of oil – which it could have done by cutting production – meant that non-OPEC producers with higher production costs (such as those in the U.S. shale oil industry) were pressured to cut output and production.
The IEA noted on Tuesday that non-OPEC supply growth was "expected to return in 2017," however, "at a modest 200,000 b/d, after declining by 900,000 b/d in 2016."