The International Energy Agency (IEA) issued its monthly Oil Market Report on Wednesday morning. In the August report, the agency said that July’s global crude oil supplies fell by 600,000 barrels a day, compared with June supplies, and averaged 96.53 million barrels a day in the second quarter of the year. Even so, compared with last July, supplies exceed demand by 3 million barrels a day.

The IEA’s global demand growth forecast for 2015 has risen by 1.6 million barrels a day from the prior estimate of 1.4 million barrels a day, and the fastest growth pace in five years. Total daily global demand for the second quarter was estimated at 93.5 million barrels a day. By the fourth quarter of the year, the IEA sees demand rising to 95.24 million barrels a day, with the supply overhang tightening but not disappearing until the second half of 2016.

According to the IEA, OPEC produced 31.8 million barrels a day in July as Saudi Arabia and Iraq increased their output. On Tuesday, OPEC raised its own estimate of demand growth for 2015 and 2016.

The IEA expects non-OPEC supply growth to drop from a record 2.4 million barrels a day in 2014 to 1.1 million in 2015 and then to begin contracting by 200,000 barrels a day in 2016.

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When OPEC released its own Monthly Oil Market Report for August on Tuesday, the cartel estimated world demand in 2015 to reach 92.7 million barrels a day. OPEC’s current supply forecast calls for non-OPEC supply to total 57.46 million barrels a day in 2015.

The IEA noted that global refinery runs reached a record high of 806 million barrels a day in July, up a staggering 3.2 million barrels a day compared with July 2014.

From the IEA’s report:

Even with the slowdown in non-OPEC production and higher demand growth, a sizeable surplus remains. Our latest balances show that while the overhang will ease from a staggering 3.0 [million barrels a day] in 2Q15, its highest since 1998, the projected oversupply persists through 1H16. Assuming OPEC production continues at around 31.7 [million barrels a day] (its recent three-month average) through 2016, 2H15 sees supply exceeding demand by 1.4 [million barrels a day], testing storage limits worldwide. The surplus drains down to about [850,000] in 2016, with 4Q16 marking the first quarter of a potential stock draw. This outlook does not include potentially higher Iranian output in the case of sanctions being lifted.

West Texas Intermediate (WTI) for June delivery traded up about 1.1% on the NYMEX Wednesday morning at $43.57, after closing at $43.08 on Tuesday. Brent traded at $50.15 on the ICE, having closed at $49.71.

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