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 The IEA, which advises industrialized countries, said in its monthly
report the United States may soon run out of empty tanks to store
crude, which would put additional downward pressure on prices.
Brent crude was down 62 cents at $56.46 by 1141 GMT. U.S. crude was
down 81 cents at $46.24.
"U.S. supply so far shows precious little sign of slowing down," the
IEA said. "Quite to the contrary, it continues to defy
expectations."
While OPEC output declined in February, global supply was up 1.3
million barrels per day (bpd) year-on-year at an estimated 94
million bpd, led by a 1.4 million bpd increase from non-OPEC
producers, the IEA said.
"The market will be more balanced in the second half, but there is
still a massive oversupply in the first half," said Barbara
Lambrecht, analyst at Commerzbank in Frankfurt.
"We still expect oil prices to fall in the coming weeks due to
rising inventories," she added.
News of a deal to end a strike by U.S. refinery workers helped
support oil as it could help to increase demand for crude oil for
processing in the world's biggest oil consumer.
The deal could reduce U.S. crude stockpiles, which climbed last week
to the highest level for this time of year in more than 80 years.
Still, forecasts of a tighter market to come may have to be revised
should a deal be reached over Iran's nuclear work that allows
Iranian oil exports, now limited by sanctions, to increase.
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Iran and six world powers are aiming to complete the framework of a
nuclear agreement by the end of March and reach a full agreement by
June 30.
The six powers have begun talks about a United Nations Security
Council resolution to lift U.N. sanctions on Iran if a nuclear
agreement is struck, Western officials said.
"Global supply and demand turns tighter in the second half but a
question mark for the second half remains Iran and the answer to
that is expected to come in over the next two weeks," said Olivier
Jakob, analyst at Petromatrix.
Investors also kept an eye on developments in Libya, where most oil
production has been kept off line by fighting.
(Additional reporting by Keith Wallis in Singapore; Editing by
William Hardy)
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