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The global oil surplus is beginning to shrink due to stronger-than-expected European and U.S. demand growth, as well as production declines in OPEC and non-OPEC countries, the International Energy Agency said on Wednesday.
The agency, which coordinates the energy policies of industrial nations, raised its 2017 global oil demand growth estimate to 1.6 million barrels per day from 1.5 million bpd.
"OECD demand growth continues to be stronger than expected, particularly in Europe and the US," the Paris-based IEA said.
Robust demand in industrialised countries was a key factor behind global demand growing by 2.3 million bpd in the second quarter, the highest quarterly year-on-year increase since mid-2015.
On the supply side, global oil output fell by 0.72 million bpd in August due to unplanned outages and scheduled maintenance in OPEC member Libya as well as non-OPEC countries such as Russia, Kazakhstan, Azerbaijan, Mexico and in the North Sea.
It was the first decline in global production in four months.
"Based on recent bets made by investors, expectations are that markets are tightening and that prices will rise, albeit very modestly," the IEA said.
OPEC's crude output fell in August for the first time in five months on renewed turmoil in Libya, with the cartel's production decreasing by 0.21 million bpd to 32.67 million bpd.
The 12 members of OPEC bound by a supply-cutting pact raised their compliance to 82 per cent in August from 75 per cent in July. Their compliance for the year so far was 86 percent.
As a result of production declines and stronger demand, global oil stocks are beginning to rebalance, according to the IEA.
"OECD commercial stocks were unchanged in July at 3.016 billion barrels, when they normally increase," the IEA said.
The global surplus of crude and stocks over the five-year average fell to 190 million barrels.
"OECD product stocks were only 35 million barrels above the five-year average at end-July," the IEA said. "Depending on the pace of recovery for the US refining industry post-Harvey, very soon OECD product stocks could fall to, or even below, the five-year level."