Oil prices resume decline

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.

In the last 25 years, we have never seen two consecutive years where the investments are declining, and this may well have implications for the oil market in the years to come, the report reads.

Oil has plunged to three-month lows as Brent crude falls under $US46 after a surprise jump in USA oil inventories, but the outlook should be brighter, analysts say.

OPEC’s decision past year to defend its market share rather than cut production to support prices has curbed growth of rival supplies such as USA shale oil.

Oil prices are set for a slow recovery, according to the latest report from global Energy Agency (IEA), which cautioned against the deep investment cutbacks in the industry.

Industrial production rose 5.6 per cent in October from a year earlier, a decline from the 5.7 per cent increase in September and below market expectations for a 5.8 per cent gain.

“In order to make profitable projects in the USA shale oil business, you need prices, we believe, within $60 to $70”, Birol said.

The Paris-based watchdog’s main scenario is for prices to gradually recover to around $80 a barrel by 2020, assuming a pick up in global economic growth and hence demand for oil. Though lower oil prices will potentially undercut a few of the benefits of renewables in the short term, the IEA said as long as policymakers remain “steadfast” in implementing policies and subsidies, the deployment of renewable technologies should remain strong.

The rebound to $80 would allow OPEC to grow its global market share to 44% by 2025 and closer to half by 2040, Bloomberg reported.

It is expected that in its December 4, 2015 annual meeting in Vienna, the group will announce the continuation of its current strategy.

A prolonged decline in crude oil prices will not only erode the earnings and market value of western oil producers, but would also adversely affect the financial position of Middle East crude oil companies.

The drop in crude oil prices is being welcomed by many; however, the cut is only good news for everyone who’s myopic.