Oil Forecast to Remain Below $100 Until 2020

Oil Forecast to Remain Below $100 Until 2020Oil Forecast to Remain Below $100 Until 2020

Oil prices will not rebound to $100 a barrel before 2020, when US shale production will gradually start to decline, according to a former head of the International Energy Agency.

Demand for crude in China, India, Southeast Asia and Africa will drive up global prices in the long run, Nobuo Tanaka, who served for four years as IEA’s executive director, said in an interview in Abu Dhabi, Fuel Fix reported.

Tanaka left the IEA, an advisory body to the world’s industrialized nations, in September 2011 and currently works as a professor at the University of Tokyo's School of Public Policy.

“Price will not go up to a hundred as easily as before,” Tanaka said. “The shale production in the US will gradually slow down after 2020 or 2025, so again there’s a chance of higher prices coming after that.”

The Organization of Petroleum Exporting Countries, led by Saudi Arabia, decided on June 5 to keep its crude production target unchanged to force higher-cost producers such as US shale companies to cut back.

The producer group has exceeded its target for 16 consecutive months, data compiled by Bloomberg show.

 “Shale production  is a built-in stabilizer,” Tanaka said. “OPEC used to manage the production to stabilize the price, that was the regime before but now when OPEC gave up this kind of function. Now the shale oil is acting in the market as a built-in stabilizer. These are new dynamics of the market.”

"The gap between crude oil supply and demand will continue until the end of the year and a supply shortfall may develop in the third or fourth quarter of 2016," he said.

“Until that time, if the current situation continues, the price will stay as low as the current one.”

Iran, the fifth-largest producer in OPEC, is preparing to bounce back from economic sanctions that choked off investment in its oil industry. The nation could boost output to 3.6 million barrels a day from its current 2.9 million in six months, the Paris-based IEA said in its monthly report on Tuesday.

Iran has said it will increase oil exports by 500,000 barrels a day within six months of the lifting of sanctions and then double that increase to 1 million barrels daily.

“Certainly that eases the market situation and means the oversupply will continue,” Tanaka said.