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The global oil market is “very close” to coming into balance, the
International Energy Agency said on Thursday, but cautioned that weaker demand growth and strong US production mean Opec’s attempts to curb supplies remains challenging.

In its monthly oil market report, the IEA said global oil stocks will decline this year if Opec maintains its production cuts with allies like Russia beyond May, potentially supporting prices after the near three year-long slump.

“The market is already very close to balance,” the agency said.

“[But] although the oil market will likely tighten throughout the year overall non-Opec production, not just in the US, will soon be on the rise again.

The IEA said oil inventories had declined in February and March but that it saw weaker demand than earlier anticipated, lowering its consumption growth forecast by around 100,000 barrels a day to 1.3m b/d. Total demand is seen reaching 97.9m b/d over 2017.

It forecast supplies outside the Opec cartel will grow by 485,000 barrels a day this year partly as a result of the recovery in prices above $50 a barrel, with US production seen 680,000 b/d higher year-on-year by the end of 2017.

The market remains torn between evidence of strong compliance by Opec members with the supply cuts they agreed at the end of last year and a rebound in the US shale industry.

Brent crude prices hit a month high above $56 a barrel on Wednesday before easing. Opec meets on May 25 to decide whether to extend its supply deal for another six months.

“Global stocks will draw further if Opec maintains solid adherence,” the IEA said.

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