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(Forbes) As the Brent front-month futures contract stabilizes either side of the $40 per barrel level, and WTI lurks within that range too, a comment by the International Energy Agency that the “oil price may have bottomed out” has triggered a lot of market interest.

In its monthly oil forecast for March, the IEA, which advises on energy policy matters of industrialized nations, noted that non-OPEC oil production would fall by 750,000 barrels per day (bpd) in 2016, compared with its previous estimate of 600,000 bpd. Specifically, US production is forecast to decline by 530,000 bpd this year. OPEC’s crude oil production eased by 90,000 bpd in February to 32.61 million bpd as losses from Iraq, Nigeria and the United Arab Emirates partly offset a rise in flows from post-sanctions Iran. China and Asian emerging markets’ percentage share of world oil demand growth (Graph © Deutsche Bank, March 2016) “Furthermore, Iran’s return to the market has been less dramatic than the Iranians said it would be; in February we believe that production increased by 220,000 bpd and provisionally, it appears that Iran’s return will be gradual,” the IEA added .

Saudi Arabia, OPEC’s largest producer, held supplies steady last month. It led the agency to opine: “There are clear signs that market forces are working their magic and higher-cost producers are cutting output.”

“For oil prices, there may be light at the end of what has been a long, dark tunnel, but we cannot be precisely sure when in 2017 the oil market will achieve the much-desired balance. It is clear that the current direction of travel is the correct one, although with a long way to go.”

The agency’s headline take attracted a lot of attention, but hidden in plain sight were key observations – particularly on China’s demand – that merit a pause for thought. The IEA predicts demand in China to grow by 330,000 bpd this year, considerably below the 10-year average of 440,000 bpd.

Although the dip would be coming from a relatively high base – i.e. a near five-year high achieved during the second quarter of 2015 when Beijing decided […]