The oil market will rebalance in 2016 or 2017, as demand grows between 1.2 million barrels a day and 1.5 million barrels a day through 2020, Yergin, vice-chairman of consultants IHS, said in a speech in Abu Dhabi.
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In its annual World Energy Outlook, the IEA said that the production cut, headcounts reduction, and falling upstream exploration and production (E&P) activities will not help the crude oil market to regain its momentum, as annual oil demand would struggle to increase.
The approach is having an effect: US production has dropped in recent months, hit hard by oil prices that have fallen to less than $50 a barrel.
As demand for oil picks up, the oil price is expected to recover gradually to reach $80 per barrel in 2020, the IEA said.
The IEA is forecasting a 20 percent cut in global oil investments this year, but it is also calling for the decline in investments to carry over into 2016.
However, “a more prolonged period of lower oil prices can not be ruled out”, IEA said in its report – especially if Organization of the Petroleum Exporting Countries members seek to preserve market share in competition with new sources in the USA and elsewhere. OPEC’s revenue from oil exports would be down by 25% at such lower prices as compared to Brent price of $80 per barrel by 2020.
Tuesday’s price gains provide little respite from a market collapse that’s seen oil slump 43 percent in the past year amid a global glut. “China’s coal use reaches a plateau at close to today’s levels, as its economy rebalances and overall energy demand growth slows, before declining”.
But while low oil prices would benefit consumers, the report says it would also weaken the links between global economic growth, energy demand and energy-related emissions. The country would, however, need massive investment to retain its production target. December Brent LCOZ5, +0.89% traded at $47.45 a barrel on Tuesday, up 26 cents, or 0.6%, on London’s ICE Futures exchange. “We should really stabilize this market”.
The low prices are squeezing USA shale and other high cost producers.
Growth in non-Opec oil supply could stop by 2020 if spending cuts continue to impact the industry, warned the global Energy Agency, the Paris-based energy advisor to industrialised nations.
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Even more concerning, the agency predicted the potential for a permanent change in how the oil market works.
