The oversupplied oil market is on track to rebalance later this year as economic growth spurs demand against a backdrop of falling US production and a string of supply outages.
The Organisation of Petroleum Exporting Countries (Opec) said in its latest monthly report, which looked ahead to the second half of 2016, that commercial crude stocks declined by eight million barrels in May. By contrast, global stocks increased by 12 million barrels in March and April, and by 19 million barrels in February.
The chronic glut of oil forced market prices to their lowest point in 12 years in January, but as the excess supply dwindles, prices have rallied higher. Opec’s reference price for May averaged US$43.21 a barrel, a gain of $5.35 compared to the previous month.
"Provided that there is a clearer picture regarding oil supply and demand, the expected improvement in global economic conditions should result in a more balanced oil market toward the end of the year," the group said on Monday.
Focusing on the 13-member group's supply and demand forecasts for the second half of the year, Opec forecast that global oil demand growth would continue to rise by 1.20 million barrels a day (mb/d) year on year. It said India would drive oil demand growth with China adding some support to that demand growth.