Fuel pumps are seen at a Shell petrol station in London, Jan. 31, 2013.
Fuel pumps are seen at a Shell petrol station in London, Jan. 31, 2013.

LONDON - World oil markets may take longer to tighten than expected due to a surge in OPEC supply and a potential rise in Iranian exports, even as demand shows signs of strength, the International Energy Agency said on Wednesday.

The agency raised its forecast for global oil demand growth in 2015 for a second consecutive month, citing strong pockets of consumption in Europe, India and the United States.

Oil prices have halved from above $115 a barrel last June due to ample supply, in a decline that deepened after the Organization of the Petroleum Exporting Countries chose to defend market share rather than cut output.

Global oil demand is rising faster than projected, but so is supply, and the IEA, which advises industrialized countries on energy policy, rolled back its prediction of when the market would tighten.

“Recent developments thus may call into question past expectations that supply and demand responses would tighten the market from mid-year on,” the IEA said in its monthly report.

OPEC production surged to 31.02 million barrels per day (bpd) in March, almost a two-year high, led by Saudi Arabia.

Saudi oil output rose by 390,000 bpd in March to 10.1 million bpd, its highest since September 2013, confirming industry reports of a surge in production as the kingdom meets domestic demand and bolsters its global market share.

Saudi output is likely to keep rising, analysts say, reducing global spare production capacity. London-based consultancy Energy Aspects said this week Saudi crude production could reach a record 11 million bpd this summer.

Iranian oil production could rise sharply if economic sanctions are removed from the Islamic Republic.

“Advances in talks on Tehran's nuclear program not only call into question past working assumptions on future Iranian output, but may already have encouraged other producers to hike supply and stake out market share ahead of Iran's potential return,” the IEA said.

In previous reports, the IEA predicted the oil market would rebalance in the second half of 2015, as North American supply growth slows and lower prices help boost demand.

Demand growth forecast raised

The IEA raised its forecast for growth in world oil use this year by 90,000 bpd to 1.08 million bpd, bringing demand in 2015 to an average of 93.60 million bpd.

It said consumption may falter in some areas but OPEC production was likely to stay high and could even rise further in April.

The agency left its forecast of demand for OPEC crude in 2015 unchanged at 29.50 million bpd, pointing to a rising supply surplus if OPEC keeps the same output.

The IEA said Iran's framework agreement with six world powers over its nuclear program could open the way for Tehran to increase its share of the world oil market.

Iran could pump as much as 3.6 million bpd within months of sanctions being lifted, up from 2.8 million bpd in March, it said. Iran has around 30 million barrels in storage on tankers that could be shipped quickly.

“Substantially higher production is unlikely before next year, but Tehran could, in theory, raise exports out of floating storage before then,” the IEA said.