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London - Despite OPEC’s near perfect implementation of production cuts aimed at clearing the surplus, the International Energy Agency said.

While cutbacks by OPEC and Russia since January have brought world markets “very close to balance” and should deplete stockpiles in the second quarter, inventories nonetheless expanded “marginally” because of production increases just before the deal took effect, the IEA said in its monthly report on Thursday. The agency lowered estimates for global demand growth because of weaker than expected economic activity in India and Russia.

Crude prices rallied last year as the Organization of Petroleum Exporting Countries and Russia announced their joint effort to end a three-year oil glut, yet gains have stalled on signs the cuts aren’t working quickly enough and are encouraging rival US shale drillers to fill any shortfall.

“Global stocks might have marginally increased in the first quarter,” said the Paris-based agency, which advises most of the world’s major economies on energy policy. While “this might be surprising as it comes after the implementation of OPEC output cuts,” it reflects the group’s export surge late last year.

US crude futures traded 7 cents higher at $53 18 a barrel on the New York Mercantile Exchange as of 12:31 p.m. London time. Oil inventories in the 34 nation Organization for Economic Cooperation and Development increased by 38.5 million barrels in the first quarter to about 3 billion barrels, offsetting the decline in emerging economies.

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“Inventories are the barometer of global oil market re-balancing,” said Neil Beveridge, an analyst at Sanford C. Bernstein & Co. “Despite OPEC cuts, global inventories showed a bigger than expected build in the first quarter. Recent data however points to sharp inventory declines in the second quarter as the delayed impact of OPEC cuts finally starts to filter through.”

Inventory Outlook

Stockpiles will decline by about 1.2 million barrels a day in the second quarter if the group maintains current output levels, and by 1.6 million a day if it extends the curbs into the second half, the IEA’s data indicates.

The IEA trimmed forecasts for global oil demand growth this year by about 100 000 barrels a day to 1.3 million a day, or 1.4 percent, as a result of weaker OECD consumption and economic activity in India and Russia “slowing abruptly.”

OPEC achieved 99 percent of its promised supply reduction through March as Saudi Arabia, along with Kuwait, Qatar and Angola, cut more than required, making up for lagging compliance in Iraq and the United Arab Emirates.

The group’s output dropped by 365 000 barrels a day to 31.68 million a day, the IEA said. OPEC’s 11 partners in the accord delivered 64 percent of their pledged cuts, their strongest adherence since the deal began.

Non-OPEC Growth

Saudi Arabia, OPEC’s biggest producer, is said to favour extending the supply curbs when the group meets next month, in line with the views of fellow members such as Kuwait and Venezuela.

While such a decision would reduce oil inventories and support prices, it would “offer further encouragement to the US shale sector and other producers,” the IEA said.

The agency boosted estimates for growth in non-OPEC supplies this year by 90 000 barrels a day to 485 000 a day amid “robust activity in the US” Drilling has more than doubled since May, as the price recovery draws investment back to the nation’s shale-oil industry, data from Baker Hughes Inc shows.