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The International Energy Agency (IEA) has predicted that oil prices could fall over the next five years as a result of the slow global economy and low demand in comparison to the rising world production of oil following increased output from North America and Iraq.
The IEA has stated that the average price of oil per barrel should drop from $107 this year, to around $89 in 2017. They noted that “even China, the main engine of demand growth in the last decade, is showing signs of slowing down.” This poor economic growth, mixed with improvements to efficiency and a general theme to move away from fossil fuels, will mean that demand will be much lower than initially predicted.
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When they realised this the agency cut their growth forecasts for the period between 2011 and 2016 by 500,000 barrels a day, and this reduction will leave oil producers no option but to drop prices.
The IEA did, however, warn that due to the “exceptional uncertainty about the global economy and heightened regional geopolitical risks,” their predictions could turn out to be deceptive. The global environment surrounding the oil markets is just too unpredictable to make certain forecasts.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com