Crude prices firmed on Thursday after the International Energy Agency (IEA) said non-OPEC production would fall this year by the most in a generation and help rebalance a market dogged by oversupply.
IEA chief Fatih Birol said low oil prices had cut investment by about 40 percent over the past two years, with sharp falls in the United States, Canada, Latin America and Russia.
Benchmark Brent crude futures were up 12 cents at $45.92 a barrel by 1204 GMT. U.S. crude futures were 4 cents higher at $44.22. Both have gained about 70 percent from lows hit between January and February.
The drop in supply from some producers, however, could be offset by increased output in countries such as Russia and Iran.
Russia’s energy minister said it might push oil production to historic highs and Iran has reiterated its intention to reach output of 4 million barrels per day after a global deal to freeze output collapsed and Saudi Arabia threatened to flood markets with more crude.
Libya could also rapidly ramp up oil production as soon as stability returns, the head of Libya National Oil Corporation (NOC) told an oil summit in Paris.
Nigeria will hold talks with Saudi Arabia, Iran and other producers by May, hoping to reach a deal on an output freeze at the next OPEC meeting in June, where it is expected to be a key item on the agenda.
“The focus of the market is primarily on price-supportive news and that’s just an indication of how sentiment is,” Saxo Bank senior manager Ole Hansen said.
Hansen said fund flows into commodities had been strong this week, driven by a weaker dollar.
The U.S. currency hit 10-month lows against some commodity-related currencies earlier this week. The Thomson Reuters Core Commodity Index rose to its highest since early December. [MKTS/GLOB]
“This whole recovery has been driven by supply being capped and supply is price sensitive and again we’re back to levels where we could see some of these producers breathe again,” Hansen said.
French bank BNP Paribas said any hope of the oil market rebalancing from the current surplus relied on a predicted decline in U.S. oil production.
“The U.S. accounts for the bulk of non-OPEC’s 2016 oil supply contraction of 700,000 barrels per day forecast. If the decline in the U.S. oil supply proves insufficient to tighten balances, then … the oil price will remain low,” it said.
In refined products, China’s exports of diesel and gasoline soared, spilling surplus fuel onto a market that is already well supplied, and threatening to cut Asian benchmark refining margins further.
(Additional reporting by Henning Gloystein in Singapore and Osamu Tsukimori in Tokyo; editing by David Evans and David Clarke)