The Organization of Petroleum Exporting Countries (OPEC) raised its forecast for world oil demand in 2018 by 60,000 barrels per day compared to its forecast last month to a total of 1.59 million barrels per day.
Oil prices rose on Wednesday, rebounding from earlier losses after USA crude stocks rose less than expected and Saudi Energy Minister Khalid al-Falih said major oil producers would prefer tighter markets than to end supply cuts too early. That's triggered more work in exploration and production, not only in the US shale oil sector, but also in the deep USA waters in the Gulf of Mexico. The IEA is more bearish in its oil market report, warning that non OPEC supply growth might outpace demand growth in 2018.
The report pointed to turmoil in global equity markets, rise in U.S. dollar rates and surge in U.S. production as "concerns" in the decline of oil prices.
"In just three months to November, (US) crude output increased by a colossal 846,000 bpd and will soon overtake that of Saudi Arabia".
Crude edged lower after an industry report was said to show USA crude and gasoline inventories are continuing to expand.
Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017.
As crude begins to recover after its worst decline in two years, it seems like a decisive moment to cash in on the decline of the global oil inventory precipitated by OPEC's supply-cut pact.
Supply-side pressures have undermined some of the effort, particularly the gains in USA oil production, a situation compounded by higher export levels.
Oil prices are now at less than half their 2014 peak, with benchmark Brent crude futures up 1.2 per cent at $63.53 a barrel in London at 4.06pm local time.
But, if demand disappoints, or if more supply comes from unexpected places - Libya's output apparently hit a five-year high in January - then things look pretty pessimistic.
If OPEC maintains high levels of compliance, the oil market could weather the new wave of shale supply, and return to a more bullish footing later this year as demand soaks up the excess. But with US stock markets rebounding on Friday and Asian markets seemingly steadying on Monday, analysts said crude was also supported.
April Brent crude, the global oil benchmark, gained 39 cents (0.62%) to end at $62.98 a barrel on London's ICE Futures exchange.
The IEA was widely criticized for their pronouncement that shale oil production would explode, which of course is a little too hyperbolic for a major agency to say.
"Recently we read of a shipment of condensate from the United States to the United Arab Emirates", the IEA's report read. "Seasonal slowdown in refinery activity across the world, USA production growth beating expectations and the well known risk of funds hitting the sell button are the current drivers". Now, history could be repeating itself.