OPEC’s push to defend its share of the global oil market has just begun and the International Energy Agency (IEA) said the group may further increase production, a strategy that caused prices to crash last year.

Gulf-based members of the Organization of Petroleum Exporting Countries are boosting supplies as they escalate a battle to preserve sales volumes, the IEA said in its monthly market report. While the U.S. shale oil industry appears to have “blinked” in the face of OPEC’s move, countries including Russia are coping better than expected with low prices and the agency increased its overall 2015 estimate for non-OPEC production.

Oil prices have recovered almost 50% in London from a six-year low reached in January as the surge in U.S. shale supplies that triggered a global glut lost momentum. The rebound, combined with reductions in production costs, may give shale producers “a new lease on life,” the IEA said. OPEC members, due to meet next month, are more united behind their November decision to maintain rather than cut production, Kuwaiti Oil Minister Ali Al-Omair said Tuesday.

“It’s hard to find anything for oil bulls to be joyful about in the IEA report, which tells a very comprehensive and indeed very negative story about the oil market,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said by e-mail. “The first battle has been won by OPEC, but the second will go to shale oil as prices rise above $60 again and producers manage to cut their costs.”

Non-OPEC Resilience

Brent crude futures, the international benchmark, climbed 0.7% to $67.30 a barrel in London for a second day of gains. West Texas Intermediate advanced 0.9% to $61.27.

Global crude oil supply was a “staggering” 3.2 million barrels a day (MMbbl/d) higher in April than a year earlier, the IEA said. The agency raised its estimate for non-OPEC supply growth in 2015 by 200,000 bbl/d because of “surprisingly strong” output during the first quarter from Russia, China, Colombia, Vietnam and Malaysia. Non-OPEC producers, which account for about 60% of global supplies, will expand output this year by 830,000 bbl/d to 57.8 million a day.

While U.S. crude inventories have declined as production in the country “buckled,” supplies of refined fuels are now building up, the IEA said. U.S. product stocks increased in March, a period when they normally decline, it said.

The faster expansion in supplies outside OPEC means demand for the organization’s crude this year will be 300,000 bbl/d lower than previously forecast at 29.2 MMbbl/d, the IEA said. That is 2 MMbbl/d lower than OPEC production last month.

Market Share

“It would thus be premature to suggest that OPEC has won the battle for market share,” the Paris-based adviser to 29 industrialized nations said. “The move by the group’s core Gulf members last November not to cut production in defense of prices was only the first step in a plan that includes actually ramping up output and aggressively investing in future production capacity.”

Supply from OPEC’s 12 members increased by 160,000 bbl/d in April to 31.21 million a day, the highest since September 2012, partly because of higher output from Iran and Iraq, according to the report. Supplies from Saudi Arabia, Kuwait and the United Arab Emirates remain near the highest level in three decades. Group output will probably stay close to 31 million barrels a day this month, the IEA projected.

Iran raised production by 90,000 bbl/d to 2.88 million in April, the highest since international sanctions on its oil exports took effect in July 2012, according to the agency. Iraq boosted output by 100,000 bbl/d to 3.8 million a day, extending a three-decade high.

Saudi Barrels

Saudi Arabia, the world’s biggest oil exporter and OPEC’s most influential member, trimmed production slightly in April to 10.1 MMbbl/d, according to the report. Sustaining output above 10 MMbbl/d for a second month demonstrates the kingdom “is intent on maintaining its policy to preserve its market share,” the IEA said.

Total OPEC output is about 1.2 MMbbl/d higher than the average of roughly 30 million a day that will be required in the second half, the report indicates. The group will meet to review its production target—currently 30 MMbbl/d—on June 5 in Vienna.

The IEA increased its 2015 estimate for global oil demand slightly, by 50,000 bbl/d. World oil consumption will rise by 1.1 MMbbl/d this year, or 1.2%, to average 93.6 million a day, according to the report.