“We need a price which will help oil producing countries to invest and consumers – to buy”.
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Higher-cost producers in Canada and Brazil, as well as the United States, are likely to fall victim to low oil prices faster than most exporters, but these declines could be offset by supply growth in Iraq and Iran.
A global supply glut has pushed oil prices from over $100 per barrel in June a year ago, to $50 per barrel today.
Annual global demand growth will average 900,000 barrels a day during the rest of the decade, driven by emerging economies, according to the report.
Mr. Rumhy said, “This is a commodity that if you have 1 million barrels a day extra in the market, you just destroy the market”.
Oil prices fell 2% on Wednesday, resuming their downtrend after a rise in the previous session, as traders awaited government data expected to show another weekly build in U.S. crude stockpiles.
This estimation is alarming as in the last two and half decades, no two consecutive years have had declining investments.
Birol, who has spent 20 years at the IEA, pointed out that China is largely to blame for the lack of demand – but not because of the slowdown in its economy necessarily.
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”. The oil cartel has kept production levels higher in recent years to retain market share and place the burden of rebalancing prices on nonmembers, like Russian Federation and US shale producers.
The report says Asia, including India, would be the leading demand centre for every major element of the world’s energy mix in 2040 – oil, gas, coal, renewables and nuclear. This would mean reduced future revenue for companies.
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. “We have to share the burden between Opec and non-Opec”.
Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, said he expected Brent to remain between $47 a barrel and $52 until the end of the year.
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A outcome of reducing oil prices is the lack of investments in the area.
