High supplies seen capping oil price until early 2017

It forecast that 4.1 million barrels a day will be added to the global oil supply between 2015 and 2021, down sharply from growth of 11 million barrels a day between 2009 and 2015.

However, supplies of USA light-tight oil were first expected to fall by 0.6m b/d in 2016 and by another 0.2m b/d in 2017, before a recovery in oil prices – together with further cost-cutting and gains in operational efficiencies – led to renewed growth in production.

By 2021, Canadian oil output is forecast to average 5.2 million bpd, of which bitumen output from Alberta accounts for almost 3.4 million bpd, or two-thirds of total supplies.

Goldman Sachs said the current rig count implied US production declining by 395,000 barrels a day between the last quarter of 2015 to the end of this year.

Analysts said that yesterday’s increase could have come mainly from OPEC trying to rally the market into thinking that there will be action to come between OPEC and non-OPEC producers.

“Anybody who believes that we have seen the last of rising LTO production in the United States should think again”, the IEA said in the report.

“However, there is a subtler conclusion from these meetings as well: The chance that Russian Federation and Saudi Arabia can cooperate in this simple game bolsters the likelihood that the countries will cooperate on ‘The Cut, ‘” Holder said in a client note.

IEA chief Fatih Birol blamed “extraordinary volatility” in oil markets that has made forecasting “more hard than ever” for its changed outlook.

“Nobody saw, amongst other things, the shale oil phenomenon in the United States coming and we were expecting a very different world”, he said. The higher capacity will not, however, allow Iran to reclaim its rank as OPEC’s second-biggest crude oil producer after Saudi Arabia.

At around 1315 GMT, US benchmark West Texas Intermediate (WTI) for delivery in March was up 1.07 at 30.71 a barrel.

This series of oil-positive developments provided a glimmer of hope that crude could possibly overcome its now rampant oversupply problem, weather the specter of potentially waning global demand, and rise further from its multi-year lows.

Global supply has to rise around three million bpd annually, just to account for decline in production, in addition to 1.2 million bpd to accommodate annual increase in demand, Birol said.

Oil prices have collapsed 70 percent since mid-2014.

The IEA described a “free for all” in the oil market in the medium term.

An imbalance in supply and demand, brimming crude stockpiles and record output from OPEC producers – the 12-member group which chose not to cut production in order to maintain market share and pressure rivals – has been blamed for the decline in prices.

Despite Monday’s gains, analysts said market conditions remained weak, especially as demand is slowing.