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

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

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

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

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

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

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

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

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

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Oil Glut to Stabilize This Year: IEA

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