PARIS: Oil prices are expected to keep sliding well into 2015, held down by weak demand and increased shale production, the International Energy Agency (IEA) said on Friday, as it maintained its full-year forecast for slow global consumption growth.
Global crude futures slumped on Thursday to lows not seen since September 2010, with London’s Brent and US benchmark Texas crude for delivery in December diving well below the $80-per-barrel mark.
The IEA said while there had been speculation that the high cost of shale extraction “might set a new equilibrium for Brent prices in the $80 to $90 range, supply/demand balances suggest that the price rout has yet to run its course.”
“Our supply and demand forecasts indicate that barring any new supply disruption, downward price pressures could build further in the first half of 2015,” it added.
Dealers are speculating over whether the 12-nation Organization of the Petroleum Exporting Countries (OPEC) cartel, which is meeting on November 27 in Vienna, would cut output quotas and thereby help to shore up prices.
Some observers believe that OPEC might decide against turning off the taps as it seeks to maintain its foothold in the US market against the flood of oil being extracted domestically from shale rock—which had in part caused the global glut.
‘It’s purely business’
As pressure mounts on OPEC to slash output, Ali Al-Naimi, oil minister of the cartel’s kingpin Saudi Arabia, said that “talk of a price war is a sign of misunderstanding—deliberate or otherwise—and has no basis in reality.”
“We do not seek to politicize oil, nor do we collude against anybody. For us, it is a question of supply and demand. It is purely business,” he said on Wednesday.
In a report to the G20 group of leading industrial powers ahead of a summit in Brisbane this weekend, the International Monetary Fund said the “recent appreciable fall in oil prices, if sustained, will boost growth.”
But the lower prices are hurting some crude exporters, including Venezuela, Iran and Russia. The latter two are also struggling with the impact of Western sanctions.
Prices have slumped by over 30 percent since June, when the Islamic State organization’s offensive in Iraq had pushed up costs.
But they have since collapsed on the back of abundant supplies, tepid demand and the strong dollar.
Supply growth also shows few signs of abating. On Thursday, US production hit a new record.
The world is awash in oil even as both Iraq and Libya—the two countries responsible for OPEC’s recent recovery in supply growth—are both in the throes of conflicts.
Demand growth is meanwhile expected to remain at the five-year low rate of 680,000 barrels a day in 2014, reaching an estimated 92.4 million barrels a day, the IEA said.
“Relatively weak Chinese demand growth, coupled with large absolute declines in both European and OECD Asia Oceania, curb the upside momentum otherwise provided by gains in other non-OECD economies and the US,” it said.