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Rich Pedroncelli / AP

Oversaturated global oil markets are on a fragile path toward emerging from the supply-demand imbalance that has depressed prices, but that progress is at risk of unraveling as OPEC's compliance with production-limiting targets declines, the International Energy Agency said Friday:

"There would be more confidence that re-balancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve."

Why it matters: The persistence of the worldwide supply glut that keeps prices at middling levels has created problems for oil-reliant Persian Gulf economies, and affects the output rate and bottom line of U.S. producers, who are forecast to drive production to new records next year.

The IEA's closely watched monthly report takes stock of efforts by OPEC and allied producers, notably Russia, to limit output through at least early 2018. It finds that the 22 countries in the agreement are collectively exceeding the target by 470,000 barrels per day last month.

  • Overall global supply grew by 520,000 barrels per day in July, the third consecutive monthly increase, as output grew Libya and Nigeria (OPEC members that aren't covered by the agreement), as well as the U.S., Canada and elsewhere.

How markets responded: via MarketWatch, the concerns about continued oversupply pushed prices lower on Friday after the IEA report's release.

Yes, but: despite the shaky compliance, IEA says the latest data on the demand side of the equation is helping to re-balance markets. They have increased projected 2017 demand growth to 1.5 million barrels per day over the prior year, and also predict "relatively strong" 2018 growth of another 1.4 million barrels per day.

  • "Producers should find encouragement from demand, which is growing year-on-year more strongly than first thought," they report.
  • IEA notes that prices for Brent crude, the global benchmark, recently stabilized above $50 per barrel, but: "If re-balancing is to be maintained, the producers that are committed to seeing the task through to March 2018 need to convince the market that they are in it together."

Go deeper

The new Washington

Illustration: Sarah Grillo/Axios

The Axios subject-matter experts brief you on the incoming administration's plans and team.

Rep. Lou Correa tests positive for COVID-19

Lou Correa. Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

Rep. Lou Correa (D-Calif.) announced on Saturday that he has tested positive for the coronavirus.

Why it matters: Correa is the latest Democratic lawmaker to share his positive test results after last week's deadly Capitol riot. Correa did not shelter in the designated safe zone with his congressional colleagues during the siege, per a spokesperson, instead staying outside to help Capitol Police.

Far-right figure "Baked Alaska" arrested for involvement in Capitol siege

Photo: Shay Horse/NurPhoto via Getty Images

The FBI arrested far-right media figure Tim Gionet, known as "Baked Alaska," on Saturday for his involvement in last week's Capitol riot, according to a statement of facts filed in the U.S. District Court in the District of Columbia.

The state of play: Gionet was arrested in Houston on charges related to disorderly or disruptive conduct on the Capitol grounds or in any of the Capitol buildings with the intent to impede, disrupt, or disturb the orderly conduct of a session, per AP.

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