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Oil Prices Rise as IEA Reports Investment Decline
Posted On Nov 20 2015
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“We see global oil demand maintaining its recent healthy growth”.
Spending for exploration and production has fallen more than 20% in 2015, but the IEA cautioned against more cutbacks. IEA further mentioned that it’s highly unlikely that Brent recovers to $80 a barrel before 2020.
On the demand side, the IEA forecast that collectively, the United States, European Union, and Japan would see their oil demand drop by about 10 million barrels a day by 2040.
At about 1230 GMT, U.S. benchmark West Texas Intermediate for delivery in December was up 38 cents at $42.13 a barrel.
The low prices are squeezing US shale and other high cost producers.
Among the products, gasoline supplies fell by 2.1 million barrels, while distillate stockpiles rose 400,000 barrels last week, the EIA said. Iraq is OPEC’s No. 2 crude producer.
Europe imports over 9 million barrels a day of crude from outside the region, with sour grades accounting for two-thirds of that, according to the IEA.
The EIA report “will provide vital clues for the near term price development”, said Sanjeev Gupta, head of the Asia Pacific oil and gas practice at professional services firm EY.
The IEA said the excess supply in the world market at large would ensure a steady supply of the fossil fuel.
Adding to the selling was news the Organisation for Economic Development and Cooperation (OECD) had cut its growth outlook for the world economy for this year and next.
Birol said that while the agency’s base-case scenario was not one in which the oil price languished around $50 for the next decade, it could not rule out a sustained period of low oil prices.
Developed countries have continued stockpiling oil and commercial inventories in OECD nations now stand at a record 3 billion barrels, the IEA said.
“We continue to expect the focus of the oil markets to shift to the surplus of refined products, and OPEC highlighted the 210 million barrel inventory overhang in the OECD relative to the five-year average”, it said.
