No oil price recovery yet despite U.S. shale slowdown: IEA

Fri Jan 16, 2015 8:07am EST
 
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By Dmitry Zhdannikov and Christopher Johnson

LONDON (Reuters) - Oil prices may have further to fall and a rebound could take some time, despite increasing signs that the downtrend will end, possibly in the second half of this year as North American supply growth slows, the West's energy watchdog said on Friday.

Crude oil prices have fallen almost 60 percent over the last six months with both of the world's crude oil benchmarks now trading below $50 a barrel as supplies of high quality, light oil from the United States and Canada have overwhelmed demand at a time of lacklustre global economic growth.

The Organization of the Petroleum Exporting Countries has not cut production despite the collapse in prices.

"How low the market’s floor will be is anybody's guess. But the sell-off is having an impact. A price recovery - barring any major disruption - may not be imminent, but signs are mounting that the tide will turn," the International Energy Agency said in its monthly report.

The IEA, which coordinates energy policies of industrialised nations, said lower prices would eventually start to curb output and boost demand.

"The most tangible price effects are on the supply front. Upstream spending plans have been the first casualty of the market’s rout. Companies have been taking an axe to their budgets, postponing or cancelling new projects, while trying to squeeze the most out of producing fields," it said.

The agency cut its outlook for 2015 non-OPEC supply growth by 350,000 barrels per day (bpd) to 950,000 bpd, down from record growth of 1.9 million bpd in 2014.

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An oil tanker passes underneath the Golden Gate Bridge during a rainfall in San Francisco, California, February 26, 2014. REUTERS/Beck Diefenbach