The oil oversupply has diminished - but stocks remain record high.
After trading around $50 a barrel in June, Brent dropped by 15% in July on slowing demand growth and an increase in both OPEC and non-OPEC production. Prices have now recovered to $47. The market rebalancing is ongoing, but the massive overhang of stocks is keeping a lid on prices.
Non-OPEC supply is on course to fall by 0.9 mbd this year compared to 2015, but record output from OPEC and weak demand has counteracted the production declines. OECD commercial inventories rose to a record 3 093 mb in June as declines in crude oil were offset by a large product build.
IEA data shows the oversupply dropped to 0.3 mbd in 2Q16. The balance is expected to turn negative in the current quarter as non-OPEC supply drops from last year and global demand growth remains above trend despite a slowdown. Crude stocks are hence expected to draw in 3Q after building an average of 1.2 mbd over the past 10 quarters.