The oil market is re-balancing as demand continues to grow but more time is needed before these shifting fundamentals are felt by markets, the latest report from the International Energy Agency said Friday.
Global oil demand is expected to reach 1.5 million barrels per day this year, the agency said, revising up its July forecast from 1.4 million. This momentum is then expected to continue into 2018, when demand is seen growing by a further 1.4 million.
This should go some way in absorbing excess supply, which OPEC oil producers have been at pains to curtail under an agreement signed in January. However, continued output expansion by Libya and Nigeria, the two OPEC members exempt from the efforts, as well as from U.S. drillers, means that the re-balancing will not play out for some time, the IEA suggested.
"Although stocks are beginning to fall, they're falling from a very great height," Neil Atkinson, head of the Oil Industry and Markets Division at the IEA, told CNBC Friday. The report noted that if OECD stocks continued to fall at rates seen in the second quarter of the year, it would still take until the early part of 2018 to return to the five-year average.
This means that more time is needed for the effects to be felt in oil prices.