The worst-case scenarios for oil prices may not materialize after all, as OPEC production fell in February and Iran did not pump as much new oil into the market as expected, the International Energy Agency said on Friday.
Prices have risen to more than $40 a barrel in recent days, up more than 40% from $28 a barrel earlier this year, buoyed also by lower output in countries outside OPEC, according to the IEA.
OPEC’s output fell by 90,000 barrels a day in February, and overall production outside of OPEC also fell by by 90,000 barrels a day.
“This should not, however, be taken as a definitive sign that the worst is necessarily over,” the IEA said in its latest Oil Market Report. “Even so, there are signs that prices might have bottomed out.”
Investors are becoming more optimistic about the sector, with several hedge-fund managers starting to bet on rising oil prices, or picking up the stocks or credit of battered energy companies in the belief that prices have dropped too far, according to the Wall Street Journal.
While 13 investment banks polled by the Journal in February predicted Brent crude would average $39 a barrel this year, the worst-case scenarios may not happen. In particular, Iran, which promised to flood the market with 500,000 barrels a day in new exports after sanctions on the country were lifted, pumped out only 3.22 million barrels a day last month — an increase of about 220,000 barrels a day over January.
“Iran’s return to the market has been less dramatic than the Iranians said it would be … [P]rovisionally, it appears that Iran’s return will be gradual,” the IEA wrote.
In February, the energy ministers of Saudi Arabia and Russia — the world’s two largest crude-oil exporters — agreed with Qatar and Venezuela to freeze their production at January levels if other producers follow suit.