Global market balanced, but there are a lot of 'ifs'

May 16 (UPI) -- The world market for oil was nearly balanced during the first quarter, though U.S. oil production and Middle East gains complicate the issue, the IEA said.

The International Energy Agency found, in a report rich with caveats, that near-balance was at hand and moving further away from supply-side strains "in the short term at least."

Robust crude oil production from North America and a previous policy from the Organization of Petroleum Exporting Countries to defend a market share with higher output tilted the global market for crude oil heavily toward the supply side. That scenario pushed crude oil prices to historic lows last year. This year, OPEC is working to counter the glut through managed declines.

In a report published Tuesday, the IEA said the oil market during the first quarter "was almost balanced."

Though supply was more or less on pace with demand, the IEA said Libya, an OPEC member exempt from the production arrangement, could play the role of the spoiler. Last week, the head of the Libyan National Oil Corp. said national production was 800,000 barrels per day, its best level since 2014, and gains there would clearly offset any declines from other producers, the IEA said.

"Of course, things will change elsewhere in the balance, and today the most closely watched data point on the supply side is U.S. crude production," the IEA's report read.

A balance sentiment was supported last week by a report from the U.S. Energy Information Administration that domestic crude oil inventories declined by 5.2 million barrels, easing some of the pressure from the glut as it was greater than at the same time last year. Global stocks, meanwhile, might not move below the five-year average, the IEA said, suggesting "much work remains to be done" to draw on oversupply.

"We have long expected that the United States will be the last region to rebalance storage, and weekly inventory releases provide constant reminders of how weak domestic fundamentals remain," Michael Tran, a commodity strategist for RBC Capital Markets, said Tuesday.

Domestic U.S. production, meanwhile, was 9.3 million barrels per day, a year-over-year increase of nearly 6 percent. The IEA's report said the U.S. shale sector is dynamic and extrapolating data into the future is like hitting a "moving target." Overall production from non-OPEC members, including about a dozen that are party to the multilateral production arrangement, is expected to grow by 600,000 barrels per day this year.