A major rally in crude oil prices stumbled out of the gates Thursday as the European Central Bank chief says the region is still facing pressures. Photo by Monika Graff/UPI | License Photo
NEW YORK, April 21 (UPI) -- A rally in crude oil prices struggled to gain momentum Thursday on lingering European economic concerns despite a major expected decline in non-OPEC output.
Crude oil prices are up more than 25 percent since the start of April and 76 percent higher than their low point for the year, moving close to their highest level in more than 23 weeks in early trading Thursday.
Much of the rally was supported by expectations that oil-rich nations meeting last weekend in Doha would agree to keep output steady at January 2016 levels. That deal collapsed in part because Iran said it wouldn't participate, though members of the Organization of Petroleum Exporting Countries are now looking to June for another chance at a deal.
Oil prices started falling from 2014 levels because of higher production from the United States, while supply-side strains this year are emerging with the expected return of Iranian crude oil to the global market.
Fatih Birol, the executive director of the International Energy Agency, said during a meeting in Tokyo that supply-side pressures in some markets are evaporating quickly under pressure from lower crude oil prices.
"Non-OPEC production is expected to decline by 700,000 barrels per day in 2016," he said in his remarks. "This would be its largest annual decline since 1992."
Crude oil traders reacted positively to the news that markets may be returning to balance after a long period of oversupply. But after early gains overnight, the price for Brent crude oil lost 1 percent to $45.32 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, gained 1.1 percent to $43.67 per barrel.
A forecast earlier this week from Wood Mackenzie said OPEC production should move up slightly this year because of gains from Iran and Iraq. Beyond 2017, the IEA chief some OPEC members should see a decline in output, however, because of lower investments.
"With the fall in non-OPEC production we are seeing, we can expect the market to come back to balance in 2017," Birol said.
On the economic front, Mario Draghi, president of the European Central Bank, said the "relatively low price of oil" could provide some positive pressure to the struggling regional economy.
"At the same time, the economic recovery in the euro area is still dampened by the ongoing balance sheet adjustments in a number of sectors, the insufficient pace of implementation of structural reforms and subdued growth prospects in emerging markets," he said. "The risks to the euro area growth outlook still remain tilted to the downside."