Oil gained for a second day as the International Energy Agency warned of a supply deficit throughout the year and US crude stockpiles shrank.

Brent futures traded above $84.50 a barrel to the highest intraday level in six weeks. IEA reversed its previous expectations of a surplus as OPEC+ looks set to continue output cuts in the second half of the year. 

There could still be a surplus in the second half, “depending on when the alliance does unwind the cuts, by how much, and the pace of it,” Toril Bosoni, head of the agency’s oil market division, said in an interview with Bloomberg TV.

IEA bolstered forecasts for world oil demand growth in 2024 by 110,000 barrels to 1.3 million barrels a day, on a stronger US outlook and the increased need for ship fuel, as vessels take longer routes to avoid Houthi attacks in the Red Sea. 

In the US, inventories dropped for the first time in seven weeks, including a fall at the hub in Cushing, Oklahoma. Meanwhile, geopolitical tensions remain elevated after this week’s Ukrainian drone strikes on Russian oil refineries.

Crude is higher this year but prices remain in a tight trading band. Supply cuts from OPEC+ have been met with higher production from outside the group, while demand concerns in China persist.