Oil market rebalancing could take until 2017-end

The global oil glut that has weighed on prices for the past two years may not clear until the second half of 2017, Shell's chief energy adviser Wim Thomas told Reuters.

The potential return to the market of some 1.5 million barrels per day of supply from Libya and Nigeria and uncertainty about high Iranian and Iraqi production levels, could delay the rebalancing of prices longer than many in the oil industry have hoped.

"All these things when they come back on the market can again postpone the true balancing," Thomas said in an interview with Reuters on the sidelines of the ONS oil conference in Stavanger, Norway.

He said the most optimistic scenario for rebalancing to happen this year would mean that overstocked inventories of crude oil have to be absorbed into the market, and that Shell was prepared for all outcomes.

"It can happen any time between the second half of this year and the second half of next year,” said Thomas.

Oil prices fell more than 70 percent from 2014 highs earlier this year and are still more than 50 percent below those levels.  

Thomas said three aspects could alter the current situation, oil demand from energy hungry nations China and India driving up oil prices, the resilience of U.S. shale producers to weak prices, and any OPEC agreement to freeze oil production between member nations.

Members of the Organization of the Petroleum Exporting Countries will meet on the sidelines of the International Energy Forum (IEF), in Algeria in late September.