A glut of oil will keep prices from rebounding until next year, much later than previously forecast, experts at the International Energy Agency said Monday.
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Brent crude touched a 13-year low of $28.88 a barrel in January. In its report, the IEA said over the course of 2015 to 2021, United States output is expected to reach an all-time high of 14.2 million barrels per day (bpd), after dipping initially this year and next.
In the 2016 edition of its Medium-Term Oil Market Report, which the IEA’s executive director Fatih Birol will formally launch later today at the CERAWeek energy conference in Houston, the organisation also said by 2021, the USA and Iran will lead the production gains among non-OPEC and OPEC countries, respectively.
Another country set to ramp up production is Iran, whose supply has come back into the market since worldwide sanctions on the country were removed recently.
Production of US shale oil, known as light, tight oil (LTO), is expected to drop by 600,000 bpd this year, and a further 200,000 bpd next year before gradually recovering.
Still, the IEA believes investors will put1 million barrels of crude in storage each day this year and that overall crude inventories will still be up slightly in 2017.
It sees 4.1 million barrels a day added to global output between 2015 and 2021.
The report forecast OPEC crude oil production capacity would rise by 800,000 bpd by 2021 as lower oil prices force the re-consideration of development projects in the early period of the forecast.
Meanwhile, consumption of black gold will increase on average by 1.2 million bpd each year, from 95.6 mbd in 2016 to 101.6 million bpd in 2021. Global oil exploration and production capital expenditures (capex) are expected to fall 17% in 2016, following a 24% cut in 2015 – which would be the first time since 1986 that upstream investment has fallen for two consecutive years.
Over the longer term, sharp cutbacks in investment leave global supplies exposed to “unpleasant oil-security surprises in the not-too-distance future”, according to the IEA.
“It is very tempting, but also very unsafe, to declare that we are in a new era of lower oil prices”, the agency said.
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The oil price crash has squeezed investment in the industry to the weakest levels in 30 years.
