The global oil market is looking "better supplied" than earlier this year thanks to a ramp up in OPEC production, but the impact of sanctions and a European Union embargo on Iranian oil raise the risk of a tighter market from the summer onward, the International Energy Agency said Wednesday.

 

"The market can clearly now be characterized as 'better supplied,' but 'oversupplied' looks something of a stretch given the myriad uncertainties that lie ahead for the summer," said the IEA, which represents the interests of major energy-consuming rich countries.

 

The IEA's warning comes as ministers from the Organization of Petroleum Exporting Countries meet this week in Vienna to discuss their output amid worries from some of the group's members that falling oil prices and rising oil inventories are indicating an oversupplied market.

 

However, there is a risk that Iran could be forced in the next month or two to start shutting in between 500,000 and 700,000 barrels a day of its oil production as exports become more constrained after the European embargo takes effect July 1 amid the continuing U.S. sanctions, said David Fyfe, head of the oil markets division at the IEA.

 

"It's likely to be a gradual process. In fact, it's already started to happen and it's likely to continue that production out of Iran is probably on a downward trend unless there is a solution to the sanctions issue," he said.

  

In May, OPEC kept its output steady at 31.87 million barrels a day as rising Angolan, Nigerian and Libyan output offset slightly lower output from Saudi Arabia and Iraq, the report said.

 

Saudi Arabia produced 10 million barrels a day in May, down 100,000 barrels a day compared with April, the IEA said.

 

The IEA kept its forecast for demand for OPEC crude in 2012 unchanged at 30.3 million barrels a day, and raised its forecast for demand for OPEC oil in the second half of this year by 100,000 barrels a day to 30.9 million barrels a day. The IEA left its global oil demand growth forecast for 2012 nearly unchanged at 820,000 barrels a day.

 

(Source: dowjones)