Global oil markets will “move close to balance” in the secondhalf of the year as lower prices take their toll on productionoutside OPEC, the International Energy Agency said.

The world surplus will diminish to 200,000 barrels a day inthe last six months of the year from 1.5 million in the first half,the agency said in a report on Thursday. Production outside theOrganization of Petroleum Exporting Countries will decline by themost since 1992 as the U.S. shale oil boom falters. The glut isalso being tempered as Iran restores exports only gradually withfinancial barriers to sales persisting even after the lifting ofinternational sanctions.

“There is no doubt as to the direction of travel for thesupply-demand balance,” the Paris-based adviser to industrializednations said. “There are signs that the much-anticipated slide inproduction of light, tight oil in the U.S. is gathering pace.”

Oil prices, which sank to 12-year lows in January amid a globalsurplus, have climbed 30 percent in the past two months as OPEC andRussia work on a plan to limit their crude production. Still,without any proposal to reduce supply, there will be little realimpact from the accord, due to be finalized in Doha this weekend,the IEA said. Brent crude futures traded near $43 a barrel onThursday, close to a four-month high.

The latest outlook represents a shift for the agency, which asrecently as February raised its estimates of the global surplus andwarned that the potential for further price losses had intensified.The prospect of markets re-balancing before year-end is gainingtraction among analysts, with Credit Suisse Group AG predicting onWednesday that stockpiles will contract in the third quarter.

Supplies outside OPEC will decline by about 700,000 barrels aday this year to an average of 57 million a day. While U.S. shaleoutput “has been more resilient to lower prices and the drop indrilling activity than expected,” there's growing evidence “thatoutput declines are accelerating,” the IEA said. The nation's crudeproduction fell below 9 million barrels a day last week for thefirst time in 18 months, the Energy Information Administrationreported on Wednesday.
Consumption Growth

The IEA, which said last month it may lower oil demand forecastsamid slowing economic activity, said it remained confident thatworld fuel consumption will increase by 1.2 million barrels a dayin 2016, or 1.2 percent. India is close to surpassing China as “themain engine of global demand growth,” according to the agency.

OPEC continues to pump about 1.2 million barrels a day more thanthe average required in the first half of the year, the reportshowed. The group's 13 members produced 32.47 million barrels a dayin March, a decrease of 90,000 a day from February because ofdisruptions in Nigeria, the United Arab Emirates and Iraq.

Iran, which saw three years of oil sanctions lifted following adeal on its nuclear program in January, has boosted output 400,000barrels a day since the start of the year to 3.3 million. Still,ongoing financial sanctions mean the pace of its return is “moremeasured than some expected,” the IEA said.

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