PARIS (AFP) – Global oil prices will recover only partially from their spectacular lows of last year, which can be expected neither to spur economic growth nor kill off US shale production, the International Energy Agency said Tuesday.
Citing a major shakeup in the oil markets, the IEA said in its five-year forecast that crude prices will recover from current levels of around $50-55 per barrel to $73 per barrel in 2020.
That level is considerably below the more than $100 price tags reached before they began to fall last June.
“The global oil market looks set to begin a new chapter of its history, with markedly changing demand dynamics, sweeping shifts in crude trade and product supply, and dramatically different roles for OPEC and non-OPEC producers in regulating upstream supply,” the IEA said.
Ample supply and subdued demand caused oil prices to tumble as much as 60 per cent, but the IEA said it sees market rebalancing occurring “relatively swiftly” with increases in inventories halting mid-year and the market tightening.
However the IEA foresees “prices stabilising at levels higher than recent lows but substantially below the highs of the last three years”.
The sharp fall in oil prices has cheered oil-consuming nations as lower fuel prices usually translate into stronger economic growth.
But the IEA said the net impact “will be more modest than might be expected” because of a lingering hangover from the global economic crisis in 2008 and weak investment.
“Oil price declines against a backdrop of slowing demand growth will not be as potent an economic stimulus as they would be in a context of strong underlying income gains,” said the Paris-based agency, which advises industrial nations on energy policies.
It noted that despite the oil price decline the IMF last month revised downward its forecast for global growth this year to 3.5 per cent from the 3.8 per cent it predicted in October.
It lowered its 2016 forecast to 3.7 per cent from 4.0 per cent.
The drop in oil prices was accelerated by OPEC’s decision in November not to cut production, saying it did not want to cede market share. Analysts saw this as an attempt to drive out higher priced competitors, particularly US shale or “LTO” oil output that has been the largest source of new supply to the market in recent years.