“The USA consumes about 19 million barrels of oil per day”.
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At around 0830 IST today, USA benchmark West Texas Intermediate for delivery in December was trading 47 cents lower at United States dollars 43.74 and Brent crude for December was down 26 cents at USD 47.18.
The executive director of IEA, Mr. FatihBirol stated that in the past 25 years, markets have not witnessed any decline in investments for two consecutive years.
Under a scenario in which the world holds rising temperatures to two degrees above preindustrial levels, crude demand would peak in 2020 at 93.7 million barrels and decline to 74 million barrels by 2040.
“You can talk all you want about oil demand being better next year and beyond, but right now we have a heck of a glut on our hands that I think has to be priced in a few more”, said John Kilduff, partner at NY energy hedge fund Again Capital.
In its latest World Energy Outlook, the IEA’s central scenario for oil prices forecasts that the oil market will rebalance at $80 a barrel in 2020, “with further increases in price thereafter”. US crude also increased $.30 to trade at $44.17 a barrel.
The worldwide Energy Agency said that even due to unprecedented declines in investment, oil price is unlikely to return to $80 a barrel before the end of the decade.
Yet unrest in Iraq, now OPEC’s second-largest producer, and aging infrastructure could hamper raising output there.
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Weaker-than expected growth in China’s industrial sector also put pressure on oil prices on Wednesday. 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. OPEC is meeting on December 4 in Vienna and few market watchers expect a change in its strategy. To meet 33% of the world’s total crude oil demand, the share of Middle East producers will increase to more than 65%. Bidness Etc believes this move by OPEC will not benefit in the long run. Iran could make a significant contribution to oil production once sanctions are lifted, but to see a major expansion the country needed to invest significantly. That means Asian markets will be the most vulnerable as production narrows to the most efficient producers, namely those in the Middle East.
