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Oil prices 50% below last year's levels

High stocks have pressured the oil price but April saw them begin to rise again

Oil futures prices eased in March, pressured by sharply higher supplies from Middle East Opec producers and a relentless build in US crude stocks as refiners in Europe and Asia prepared for maintenance. But prices started to rise during the first half of April on expectations that the sell-off in oil that began last summer was losing steam.

WTI was trading at around $56.61 a barrel (/b) as Petroleum Economist went to press, while Brent was trading at roughly $62.08/b, around 50% below last June’s peak.

But oil prices are expected to slip in the second quarter as refineries undergo seasonal maintenance work, particularly in Asia, one of the crude market’s biggest props, analysts believe.

Still, months into the process of market rebalancing the outlook is only getting murkier, the International Energy Agency (IEA) said in its latest market report.

On the supply front, considerable uncertainty remains over the ultimate outcome of the talks between Iran and world powers and the timing of a potential lifting of sanctions. But an increase in Iranian exports has become a real possibility, the IEA said.

The way lower prices affect the market is also different from previous price corrections, which is causing uncertainties, and these are not confined to the response of unconventional North American supply to lower prices.

Stronger-than-expected first-quarter 2015 demand might signal a faster recovery – as would a faster-than-expected decline in North American unconventional supply – but might just as likely point to a slower one if pockets of demand strength prove short-lived and lead to weaker deliveries later on, noted the IEA.

Advances in talks on Iran’s nuclear programme not only call into question past working assumptions on future Iranian output, but the talks may already have encouraged other producers to lift supply and stake out market share ahead of the potential return of Iranian volumes.

All in all, the market rebalancing may still be in its early stage, concluded the IEA.

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