The International Energy Agency (IEA) are reporting that global oil prices are stabilising and could even begin to rise in the weeks and months ahead.
An over supply of oil in the market has been an issue for a sustained period with huge output from the USA flooding the supply chain following the spread of fracking. China’s slowing economy has seen demand for oil drop in the giant Asian powerhouse which also pushed oil prices down.
Many large oil companies have made significant job cuts, exploration projects have been curtailed and profits have fallen.
Member nations of the oil-producing organisation Opec have been reluctant to slow supply levels in order to bottom out the oil price, due to concerns of losing market share.
However American production is forecast to drop by 530,000 bpd in 2016, with the IEA stating, “There are clear signs that market forces are working their magic and higher-cost producers are cutting output.”
An increase in oil supply from middle eastern territories such as Iran has also been lower than first forecast, which also eases the over supply fears. Prices for oil have dropped globally by 70% since June 2014, even hitting a low of $27 per barrel earlier this year.
“Iran’s return to the market has been less dramatic than the Iranians said it would be; in February we believe that production increased by 220,000 bpd and provisionally, it appears that Iran’s return will be gradual,” the IEA added.
The IEA, predicts non-Opec output will now decrease by 750,000 barrels per day (bpd) in 2016, significantly more than a previous forecast of 600,000 bpd.
Brent crude oil prices increased last week 1.9%, up to $40.79, while the West Texas Intermediate price was up to $38.77 per barrel, a 2.5% rise.