'Enormous' inventories to keep lid on oil price: IEA

A huge overhang in oil stocks lingering across the world will keep a cap on any further oil price rises, the IEA said Tuesday, even as supply and demand move towards balance by the end of the year, AFP reports.

Global demand for oil is steadily rising thanks to solid economic growth, and supply has been curbed by unexpected production cuts due to wildfires in Canada and rebel attacks in Nigeria, as well as falling US shale production, the International Energy Agency said in its monthly oil market report.

These factors recently pushed the oil price above the key level of $50 as supply came closer to matching demand, a process known as rebalancing which the IEA expects to be fully in place in the second quarter of this year.

But while market forces play out to help the oil price continue climbing from its $25 low point at the start of the year, there are still large oil inventories waiting to feed into the market, causing a supply glut that is likely to keep a lid on gains for some time.

"There is an enormous inventory overhang to clear," the IEA said. "This is likely to dampen prospects of a significant in oil prices."