IEA: Oil Price Recovery Will Be Modest by 2020 as Supply-Demand Curve Altered
The International Energy Agency (IEA) Tuesday announced that a recovery in oil prices will likely be swift but, in the medium term, they will not reach levels seen in the first half of 2014.
While concerns over a supply glut have caused deep crashes in price, increasing demand will see more modest rebounds than might be expected from such a crash.
The current low oil price will not prove as great a stimulus for demand as has been the case after prior price crashes, said IEA.
IEA, which informs governments of 29 member countries on energy matters, delivered the comments as part of its annual Medium-Term Oil Market Report for 2015.
According to ICIS News, IEA predicted oil prices for 2015 to stay around $55 per barrel, recovering gradually to hit $73 per barrel by 2020.
This is far below predictions in its 2014 Medium-Term Oil Market Report of $87 per barrel by 2020.
The development of U.S. light, tight oil (LTO) in recent years has fundamentally altered the way oil prices respond to supply and demand, said IEA.
“Business as un-usual“
“This unusual response to lower prices is just one more example of how shale oil has changed the market,” said IEA Executive Director Maria van der Hoeven, launching the 2015 Report in London.
“OPEC’s move to let the market rebalance itself…may have effectively turned LTO into the new swing producer, but it will not drive it out of the market.
“LTO might in fact come out stronger.”
OPEC’s share of global oil production will recover somewhat from recent lows, said IEA, but it will not enjoy the levels seen before the surge in LTO supply.
“Growth in US LTO is expected to regain momentum in the latter part of the forecast period as prices recover, and North America remains a top source of supply growth for the remainder of the decade.”
The comments come in contrast to those of Total CEO Patrick Pouyanné who, in January, said investment cutting by oil producing firms could squeeze supply and send oil up to $200 per barrel within five years.