BP BP Plc

By Sarah McFarlane and Jenny W. Hsu 

SINGAPORE -- After repeated false starts, energy executives say global oil demand is finally catching up with supply, a turning point in the market after more than two years of a glut weighing on prices.

"We believe that in June, July actually we might have started to draw," Andy Milnes, chief executive for Supply and Integration at BP PLC, referring to global stock drawdowns.

Global oil prices have been under pressure as supply growth has outpaced demand since 2014, leading to high cost producers curbing output and investment plans being slashed.

Oil producers and market watchers have made sunny projections in the past only to see prices fall again when consumption has failed to live up to expectations and idled production has been brought back online. But this time, they say, is different.

"The world is demanding more hydrocarbons than it is producing...There is light at the end of the tunnel," Mr. Milnes said, speaking at the S&P Global Platts conference in Singapore.

According to the International Energy Agency, global oil production exceeded demand by around 250,000 barrels a day in the second quarter, down from surplus supplies of 1.32 million barrels a day the previous quarter.

While the IEA has published its June and July supply figures, there isn't data available yet on demand for all of the period. Last month it predicted that supply would lag behind demand by nearly a million barrels a day from July through September.

Industry leaders were optimistic on demand growth in Asia in particular, where gasoline and crude consumption have been climbing sharply.

In China, where there are around 100 cars per 1,000 people, car ownership has potential to triple in the next couple of years, said Zhang Liucheng, vice president for trading and marketing at Shandong Dongming Petrochemical, China's largest independent refinery.

China's crude oil imports in the first half of this year grew 14% to 7.5 million barrels per day, according to government data.

At the same time, major oil companies have reacted to lower oil prices by drastically cutting spending on exploration and new projects with consultancy Wood Mackenzie estimating that the number of oil discoveries made in 2015 was 2.7 billion barrels, the lowest volume since 1947, indicating a supply crunch could eventually materialize.

Global crude prices fell to a 12-year low in February at $26 a barrel but have since rebounded, with the benchmark Brent contract up 0.7% at $47.57 a barrel on Wednesday, although still less than half what it was mid-2014.

The overhang of global stocks could delay a more drastic rebound, however.

According to Keisuke Sadamori, director of energy markets and security at the International Energy Agency, world stocks remain near a record of more than 3 billion barrels.

In some parts of the world where it is difficult to obtain accurate data on stocks, analysts expect struggling producers may be monetizing their oil due to the prolonged price decline.

"Just intuitively, if you're in Nigeria or Brazil right now what do you need, inventories in tank or cash? The answer is cash so it's certainly plausible they would be running down inventories there," Seth Kleinman, global head of energy strategy at Citi said.

"Clearly there is some process of rebalancing going on."

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

September 07, 2016 10:16 ET (14:16 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.