The oil market is re-balancing as demand continues to grow but more time is needed before these shifting fundamentals impact prices, the latest report from the International Energy Agency said Friday.

Global oil demand is expected to increase by 1.5 million barrels per day this year, the agency said, revising up the 1.4 million figure forecast in last month’s report. This momentum is expected to continue into 2018 when demand is seen growing by a further 1.4 million.

This should go some way in absorbing excess supplies, which OPEC oil producers have been at pains to curtail under an agreement signed in January. However, continued output expansion by Libya and Nigeria, the two OPEC members exempt from the efforts, as well as from U.S. drillers, means that the re-balancing will not play out for some time.

The IEA said that while oil stocks are continuing to fall, they have a long way to come down.

“Although stocks are beginning to fall, they’re falling from a very great height,” Neil Atkinson, head of the Oil Industry and Markets Division at the IEA, told CNBC Friday.

This means that more time is needed for the effects to be felt in oil prices.

“It’s very difficult to see, based on the current fundamentals, oil prices rising significantly in the next few months. But even when they begin to do so they will be capped by the availability of short-cycle oil production from the U.S.”

Oil prices fell on the release of the report Friday morning. Brent was trading at $51.46 per barrel while WTI was at $48.14.

On Thursday, OPEC announced a continued rise in its collective output, led by increased output by Libye and Nigeria.

OPEC output jumped by 173,000 barrels a day in July to almost 32.9 million barrels, its highest level since the production agreement came into force in January.

The increase marks the fourth consecutive month of output expansion. Compliance with the deal by OPEC members currently stands at 87 percent, according to the IEA.

– CNBC’s Tom DiChristopher contributed to this report.

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