Ample supplies in the U.S. and globally are a key reason that prices plunged in the past year to multiyear lows, where they remain, and are expected to remain subdued into 2016.
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According to Business Insider, economist Gary Shilling noted that this production dynamic of the US and OPEC could send oil prices dropping to $10 to $ 20 per barrel.
Benchmark U.S. crude futures slipped to a two-week low at US$43.55 (RM188.18) a barrel and were trading down over half a dollar from their last close at US$43.68 by 0003 GMT.
The IEA revealed in its annual World Energy Outlook that it expects demand growth to increase on an annual basis by 900,000 barrels per day till 2020.
The Paris-based watchdog’s main scenario is for prices to gradually recover to around $80 a barrel by 2020, assuming a pick up in global economic growth and hence demand for oil.
Consumption growth will slow from 2020 because of rising oil prices, efforts to phase out fuel subsidies, energy-efficiency policies and increased used of alternative fuels.
“By 2040, China’s net oil imports are expected to be five times those of the United States, while India’s easily exceed those of the European Union”, the IEA said.
However, while prices are low, markets will become increasingly vulnerable, given the point that only highly efficient producers will be able to stay in production. “Looking to the long term… the LNG industry will also have to rely on the old-fashioned virtues of tight project management, competitive contracting and procurement strategies and cost control to ensure that its product continues to enjoy high demand”. The country would, however, need massive investment to retain its production target. In its “central” scenario, it sees oil prices rebalancing in 2020 at $80 per barrel, with increases in the years following. If that happens, the IEA warned, the world will be forced to rely on a small number of Middle Eastern producers.
A few of the OPEC members like Algeria, Venezuela and Iran are facing the pinch more than the others as oil prices continue its downward run.
Demand will rise by about 17 million barrels a day to nearly 110 million barrels a day by 2040, with 70% of the growth to come from Asia, the head of the Organization of Petroleum Exporting Countries said at an event in Doha.
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Meanwhile, crude oil production is forecast to decrease till the third quarter of 2016 before picking up.
