The global oil glut will persist in 2017, limiting any chance of a price rebound in the short run as the surplus takes even longer to clear than previously estimated, according to the International Energy Agency.
“Only in 2017 will we finally see oil supply and demand aligned but the enormous stocks being accumulated will act as a dampener on the pace of recovery in oil prices,” the Paris-based adviser to 29 countries said in its medium-term report on Monday, Bloomberg reported. “It is hard to see oil prices recovering significantly in the short term from the low levels prevailing” currently, it said.
IEA also predicted that US shale oil production will retreat this year and next as the price slump hits drilling, but its subsequent recovery will ensure America remains the biggest source of new supply to 2021. It said while US light, tight oil output is "falling steeply for now" amid a low price environment, the market will begin rebalancing in 2017 and, soon after that, the US oil industry could see a robust increase in oil production.
By 2021, the IEA said, "the US and Iran are seen leading production gains among non-OPEC and OPEC countries respectively". The Organization of Petroleum Exporting Countries will expand its market share slightly this decade, with Iran, newly released from international sanctions, displacing Iraq as the organization’s biggest contributor to supply growth, the agency said.
The IEA’s new outlook is the latest sign that oil forecasters are bracing for a “lower-for-longer” price environment.
The agency acknowledged that the industry’s expectations and its own predictions that oil markets would recover in 2015 proved “very wide off the mark”.
The report also signals that while OPEC will succeed in its policy of defending market share, the group will have to endure a prolonged period of reduced revenues.
Oil prices plunged from a high of around $115 a barrel in June 2014 and are currently at around $33 for benchmark Brent crude and $30 for US West Texas Intermediate.
An imbalance in supply and demand, brimming crude stockpiles and record output from OPEC producers–the 13-member group that chose not to cut production to maintain market share and pressure rivals–has been partly blamed for the decline in prices. Non-OPEC producers, such as those in the US, have struggled to break even with the lower oil price and have cut costs drastically, lowering US oil output.
