Oil dips as IEA sees global glut dwindling

Oil prices edged lower Thursday after the International Energy Agency said it saw the global oversupply dwindling by year's end and as traders awaited a key producers meeting this weekend.

US benchmark West Texas Intermediate (WTI) for delivery in May fell 26 cents to $41.50 a barrel on the New York Mercantile Exchange.

In London, Brent North Sea crude for June delivery, the international benchmark for crude, finished at $43.84 a barrel, a decline of 34 cents from Wednesday's close.

The International Energy Agency, in a monthly report issued Thursday, said the global glut would likely ease by the end of 2016.

The IEA projected the oil surplus would fall to 200,000 barrels per day in the second half of 2016, from 1.5 million bpd in the first six months.

The oil market had been slightly higher before dipping late in the session.

"It was really the IEA report and the issues relating to the supply that have rallied the market," Bob Yawger of Mizuho Securities USA said before prices slipped.

In its report, the IEA said it still anticipates "steady oil demand growth and falling non-OPEC supply," referring to producers outside of the Organization of the Petroleum Exporting Countries.

"This scenario is now taking shape and the oil market looks set to move close to balance in the second half of this year," it said.

The 29-nation agency downplayed expectations that Sunday's meeting of OPEC and non-OPEC producers in the Qatari capital of Doha could prove significant in addressing the market imbalance.

"We cannot know the outcome but if there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited," said the IEA, which advises countries on energy policy.

Traders will closely watch Sunday's talks after prices slumped by about three quarters to below $30 between mid-2014 and February this year on the back of the global supply glut and overproduction.

"I personally don't think there'll be any kind of significant agreement but some people will probably buy into it, at least for a couple of days," Yawger said.

Looking ahead, EY oil and gas analyst Sanjeev Gupta said that "China's first-quarter economic data due tomorrow (Friday) and results of the Doha meeting will set the tone for near-term price development."