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IEA: World oil market tighter than looks

International Energy Agency (IEA) said Friday that the world oil market could be tighter than appears, despite an apparent surplus in supply and demand, as refineries increase processing to meet summer demand.

The IEA (which advises industrialised nations) expects the global supply to increase by 2.1 millions barrels per day in this year. This is an increase of 300,000 bpd over its previous forecast. The IEA said that world demand would only rise by 700,000 barrels per day, suggesting a large surplus.

Despite these changes, the IEA stated that the tightening market was due to the OPEC+'s latest supply increase and rising refinery processing rates aimed towards meeting summer travel demand and power generation.

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In a report, the agency stated that "the decision by OPEC+ of further accelerating the unwinding production cuts failed in a significant way due to tighter fundamentals."

The hefty surplus on our balance sheets also suggests a tighter oil market.

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OPEC and Western oil giants have said that the increase in output does not lead to an increase in inventories. This shows that markets are hungry for more oil.

The IEA predicts that demand will grow by 720,000 bpd next year. This is 20,000 bpd less than was previously expected. Supply growth will also increase by 1.3 millions bpd implying a surplus. (Reporting and editing by Tomasz Janovski and Joe Bavier.)

(source: Reuters)