London--Global oil prices will recover only partially from spectacular lows, which are unlikely to spur economic growth or kill off US shale gas production, the International Energy Agency said Tuesday.
The IEA said in its five-year forecast that crude prices will recover from around their current range of $50-60 per barrel, but remain well below the level of more than $100 per barrel seen before the slump began last June.
"While there have been drops and price corrections roughly every 10 years since the 1970s, there has never been a situation like we are facing today," the IEA's executive director Maria van der Hoeven said in London following the release of the report.
"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 report said.
Ample supply and subdued demand caused prices to fall as much as 60 percent but the IEA said market rebalancing could occur "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".
Oil prices fell Tuesday on the IEA's forecast, with Brent North Sea crude for March sliding 32 cents to $58.02 a barrel, and US benchmark West Texas Intermediate (WTI) for March delivery tumbled $1.10 to $51.76 a barrel.
The sharp fall in oil prices has cheered oil-consuming nations as lower fuel prices usually translate into stronger economic growth.
The IEA cautioned that 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.
- No 'potent' economic stimulus -
"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 agency.
It noted that despite the oil price decline the IMF last month revised downward its forecast for global growth this year to 3.5 percent from the 3.8 percent it predicted in October.
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.
It was uncharacteristic as the 12-nation cartel that supplies 30 percent of global crude has usually reduced output in case of excess supplies on the market so that prices stabilise.
- US king of 'swing' -
"OPEC's move to let the market rebalance itself is a reflection of... how shale oil has changed the market," van der Hoeven said.
"It may have effectively turned LTO into the new swing producer, but it will not drive it out of the market," she said.
"LTO might in fact come out stronger."
The IEA sees US shale oil production growth slowing to a trickle this year, but quickly bouncing back, to post a 50 percent rise from 2014 levels to hit 5.2 million barrels per day (mbd) in 2020.
AFP
