The International Energy Agency (IEA) has stated that oil prices may have “bottomed out” due to a decrease in production outside the Organization of Petroleum Exporting Countries (OPEC). Oil production outside OPEC is forecast to decrease by 750,000 barrels/day for 2016. This number is 150,000 barrels/day more than IEA estimates from January. Since hitting the lowest prices in 12 years in January, oil prices have bounced back by 50% due to reductions in US shale production, as well as a Saudi Arabian deal with Russia to “freeze” oil output. Earlier this month, oil traded for around $40/barrel. The IEA expects global oil consumption to increase to 1.2 million barrels/day, which will reduce the world surplus to 200,000 barrels/day. Due to Iran’s recently lifted sanctions on oil trade, the country produced 220,000 barrels/day in February for a total of 3.22 million barrels, its highest output in four years. Total production of OPEC members has decreased to 32.6 million barrels/day, though the organization is still producing 700,000 barrels more than its average required output. In the US, oil production will decrease by 530,000 barrels/day for 2016, and production in Brazil and Colombia will also decline.

Source: Bloomberg Business