IEA sees new era, no quick rebound in oil prices

Fri Nov 14, 2014 7:43am EST
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By Dmitry Zhdannikov and Alex Lawler

LONDON (Reuters) - The oil market has entered a new era with lower Chinese economic growth and booming U.S. shale output, making a return soon to high prices unlikely, the West's energy watchdog said on Friday.

The International Energy Agency, which typically refrains from predicting oil prices, said in its monthly report that prices could fall further in 2015 after declining to their lowest levels since 2010 below $80 per barrel LCOc1.

"While there has been some speculation that the high cost of unconventional oil production 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," the IEA said.

Barring any new supply disruption, "downward price pressures could build further in the first half of 2015", it said.

Oil prices have fallen 30 percent since peaking in June, pressured by a strong U.S. dollar and rising U.S. light oil output while largely ignoring the impact of Libyan supply disruptions.

Benchmark Brent crude oil was up 50 cents at $77.99 a barrel by 0910 GMT on Friday, having dropped from above $115 in June.

"Pressure on OPEC to reduce production is building, but at the time of writing there appeared to be no clear consensus on a formal supply cut ahead of its meeting in Vienna later this month," said the IEA, which represent industrialised nations.

For 2015, the IEA left its forecast of global oil demand growth unchanged at 1.13 million from a five-year annual low of 680,000 bpd in 2014, saying the macroeconomic backdrop was expected to improve.   Continued...

A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson/Files