After the International Energy Agency announced that the global oil stocks will undergo a rather “dramatic” decline, oil prices surged on Thursday.
The said reduction will be experienced in the second half of the 2016 on the back of strong demand and falling supply by a number of major producers. A succession of production disruptions around the world was also a key player in taking the barrels out of the markets for weeks, thus providing support to prices.
Global oil benchmark Brent Crude climbed $0.43 or 1% to $46.67 a barrel on London’s ICE Futures exchange. West Texas Intermediate futures were trading up $0.36 or 0.8% to $47.96 a barrel on the New York Mercantile Exchange.
Nymex reformulated gasoline blendstock dipped 0.3% to $1.58 a gallon.
In its monthly report, the top energy monitor also said that global oil stocks will continue to rise in the first half of the year as Iran increases its manufacturing, contributing to the nearly two years of surplus that saw prices dipping to lows. Iran’s upsurge in oil production and exports after the lifting of international sanctions has been faster than expected. The nation boosted daily oil output by 300,000 barrels in the previous month to 3.56 million barrels per day.
This added to increase the joint output of the Organization of the Petroleum Exporting Countries in the previous month to 32.76 million barrels a day, a level last achieved in April 2008. According to IEA, production outside the OPEC continues to drop, headed by a declining output in the United States.
On the other hand, traders are monitoring production outages that raised prices in recent weeks. Disruptions in Nigeria, Ghana and Canada have surpassed 1.5 million barrels a day, according to the IEA. Analysts predict many of those barrels to come back online soon, however.
“These disruptions are temporary and we believe that support to price should remain short-lived,” Head of commodities research at Julius Baer, Norbert Ruecker, stated. “The market remains awash with oil as rising Middle Eastern output is more than offsetting declining U.S. shale production and the various temporary disruptions.”
In the U.S., crude-oil stockpiles contracted analysts’ expectation by dropping 3.4 million barrels in the week ended May 6, according to data from the Energy Information Administration.
Investors are relaxed in the steady drop in U.S. output while inventories maintain near the highest levels in more than 80 years. The EIA data reveal that U.S. crude production plunged last week to the lowest level since September 2014 to 8.8 million barrels per day.