A pickup in demand and a slowdown in oil supply growth, mainly from the U.S., could moderate worldwide inventory builds in the second half of 2015, according to the latest U.S. Energy Information Administration’s (EIA) short-term energy outlook (STEO).

Unexpected actions above ground, however, could alter the forecast.

Currently, global production continues to surpass demand, but lower oil prices are expected to slow production as more operators are forced to lay down rigs to salvage budgets.

Worldwide, production of oil and other liquids is expected to increase to 94.16 MMbbl/d by year-end 2015 and inch up to 94.26 MMbbl/d in 2016, the EIA said. These figures are up from 93.09 MMbbl/d in 2014.

Consumption was 92.05 MMbbl/d in 2014 and is forecast to reach 93.09 MMbbl/d by year-end 2015. A turnaround is projected in 2016 when consumption of 94.20 MMbbl/d is expected to outpace supply.

“If the new framework agreement between the P5+1 [U.S., Britain, France, Germany, Russia and China] and Iran results in a comprehensive deal and a lifting of sanctions, it could significantly change the STEO forecast for oil supply, demand, and prices, which still assumes that Iran’s production will stay close to the current level through 2016,” EIA said in the outlook.

World leaders have until June 30 to reach a final deal with Iran. The leaders announced earlier this month that they had reached agreement on a framework that would prevent Iran from being able to build a nuclear bomb in exchange for lifting sanctions. Details must still be hashed out.

“However, if a comprehensive deal is reached, the re-entry of more Iranian barrels could result in a $5-$15/bbl lower baseline STEO price projection in 2016 compared with the current STEO,” the EIA said. “Iran is believed to hold at least 30 million barrels in storage. It is possible that Iran will attempt to move oil out of storage more quickly sometime during the second half of 2015 in preparation to increase production if discussions on sanctions show progress.”

An increase in Iranian oil exports could be followed by an increase in output, the EIA said.

OPEC crude oil production is expected to rise by about 100,000 bbl/d in 2015 from its average of 30.1 MMbbl/d in 2014, led by production growth in Kuwait and Iraq. In 2016, production could fall by 500,000 bbl/d. In previous years, growth in Kuwait and Iraq was able to offset production declines from other OPEC producers including Algeria, Angola, Kuwait and Libya; however, that is not expected to be the case in future years.

Meanwhile, non-OPEC production is projected to continue growing, but not nearly as fast.

The EIA thinks non-OPEC production will increase by 700,000 bbl/d in 2015 from 2.2 MMbbl/d in 2014. Production could grow by 400,000 bbl/d in 2014, stymied by lower oil prices.

Production from the U.S. is not expected to be an exception.

Here, EIA predicts production will reach 9.4 MMbbl/d in second-quarter 2015 before falling by about 210,000 bbl/d in the third quarter due to “unattractive economic returns in some areas of both emerging and mature oil production regions.”

Projected oil prices, which could average about $57/bbl WTI in second-half 2015, should be high enough, however, to stave off a drilling halt in the Bakken, Eagle Ford, Niobrara and Permian basins.

The EIA thinks gradually rising WTI crude oil prices later this year will spark more drilling as “companies take advantage of lower costs for acreage leasing, drilling and well-completion services, resulting in growing production despite the relatively low WTI price.”

This will, in turn, lower the backlog of uncompleted wells in the U.S.

The increased supply will be needed to meet growing global consumption, predicted to increase by 1.0 MMbbl/d in 2015 to about 93 MMbbl/d and rise by 1.1 MMbbl/d in 2016.

Oil consumption in the U.S. and China are projected to grow in coming years.

Contact the author, Velda Addison, at vaddison@hartenergy.com.