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 The West's energy watchdog said in a monthly report that although
higher-than-expected oil demand was helping to ease the glut, growth
in global oil consumption was far from spectacular.
As a result, signs are emerging that the crude oil glut is shifting
into refined products markets, which could make a recent rally in
oil prices unsustainable.
"Despite tentatively bullish signals in the United States, and
barring any unforeseen disruption elsewhere, the market's short-term
fundamentals still look relatively loose," said the IEA, which
coordinates energy policies of industrial nations.
Global oil production exceeds demand by around 2 million barrels per
day, or over 2 percent, following spectacular growth in U.S. shale
production and OPEC's decision last year not to curtail output in a
bid to force higher-cost U.S. producers to cut theirs.
As a result, benchmark Brent oil prices more than halved from June
2014 to $46 per barrel in January. They have since rebounded to
around $65, however, on fears of a steep slowdown in U.S. production
growth.
 "In the supposed standoff between OPEC and U.S. light tight oil
(LTO), LTO appears to have blinked. Following months of cost cutting
and a 60 percent plunge in the U.S. rig count, the relentless rise
in U.S. supply seems to be finally abating," the IEA said.
But it added that the recent oil price rebound was giving U.S.
producers a new lease on life.
"Several large LTO producers have been boasting of achieving large
reductions in production costs in recent weeks. At the same time,
producer hedging has reportedly gone steeply up, as companies took
advantage of the rally to lock in profits," the IEA said.
"It would thus be premature to suggest that OPEC has won the battle
for market share. The battle, rather, has just started."
Despite a certain slowdown in U.S. oil output growth, global crude
supply was up by a staggering 3.2 million bpd in April year-on-year,
the IEA said.
Beyond high OPEC production, the IEA cited strong performance of
non-OPEC countries including Russia, Brazil, China, Vietnam and
Malaysia.
The IEA lifted its 2015 forecast for non-OPEC supply growth by
200,000 bpd since last month's report, saying non-OPEC producers
will contribute 830,000 bpd of additional supplies in 2015.
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GLUT IN REFINED PRODUCTS
The IEA left its 2015 oil demand growth forecast broadly unchanged
from last month at 1.1 million bpd, to 93.6 million bpd, up from 0.7
million in 2014.
It said an improving economic outlook for Europe was offset by
reduced expectations for oil demand growth in the former Soviet
Union, the Middle East and Latin America.
In another bearish sign for oil prices, U.S. product stocks built
counter-seasonally in March, and China posted record-high distillate
builds, the IEA said.
"Preliminary data show OECD-wide product stocks stopped drawing and
swung into growth in April. More such builds may follow as global
demand goes through a seasonal soft patch and refining activity
increases worldwide," it said.
Adding to the bearishness, the IEA said it saw little sign of OPEC
curtailing its output in the next month, saying
early soundings suggested the producer group will sustain rates at
around 31 million bpd during May.
"Bucking the global trend, Kuwait, Saudi Arabia and the UAE are all
raising their rig count and expanding their drilling programs. Iraq
and Libya, meanwhile, continue to raise production against all odds.
And Iranian supplies hit their highest since July 2012," it said.
April marked the 12th consecutive month in which OPEC production ran
above the group's self-imposed 30 million bpd supply target and was
up nearly 1.4 million on the year before as top exporter Saudi
Arabia held flows above 10 million.
The IEA said it cut its call on OPEC crude by 0.3 million bpd to 30
million bpd for the second half of 2015 due to upward revisions to
non-OPEC supply growth.
(Writing by Dmitry Zhdannikov; Editing by Dale Hudson)
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