Oil prices may not fall further: IEA

Brent crude was on track for its third weekly gain on Friday, supported by an optimistic report from the International Energy Agency (IEA) that said the market may have reached its bottom.

Still, analysts cautioned that a large glut of oil remained, with Goldman Sachs warning that US crude could saturate storage in the coming months.

US crude futures CLc1 were trading at $38.64 a barrel, up 80 cents from their last close, having hit a 2016 high of $38.96 earlier in the day.

Brent crude futures LCOc1 were at $40.65 a barrel, up 60 cents, and on track for their third weekly gain in a row.

Both contracts were trading more than 45 percent higher than the lows plumbed earlier this year.

IEA said in a monthly report that oil might have bottomed and that low prices were beginning to impact crude output outside producer organisation Opec.

“There are clear signs that market forces ... are working their magic and higher-cost producers are cutting output,” the Paris-based IEA said.

The group, which coordinates energy policies of industrialised nations, said it believed non-Opec output would fall by 750,000 barrels per day (bpd) in 2016 up from its previous estimate of 600,000 bpd.

It also said Iran’s post-sanctions return to exporting was happening more gradually than expected, keeping its barrels from putting significant pressure on the market.