• 1 day Shell Oil Trading Head Steps Down After 29 Years
  • 1 day Higher Oil Prices Reduce North American Oil Bankruptcies
  • 1 day Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 1 day $1.6 Billion Canadian-US Hydropower Project Approved
  • 1 day Venezuela Officially In Default
  • 2 days Iran Prepares To Export LNG To Boost Trade Relations
  • 2 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 2 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 2 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 2 days Rosneft Announces Completion Of World’s Longest Well
  • 2 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 2 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 3 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 3 days Santos Admits It Rejected $7.2B Takeover Bid
  • 3 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 3 days Africa’s Richest Woman Fired From Sonangol
  • 3 days Oil And Gas M&A Deal Appetite Highest Since 2013
  • 3 days Russian Hackers Target British Energy Industry
  • 3 days Venezuela Signs $3.15B Debt Restructuring Deal With Russia
  • 3 days DOJ: Protestors Interfering With Pipeline Construction Will Be Prosecuted
  • 4 days Lower Oil Prices Benefit European Refiners
  • 4 days World’s Biggest Private Equity Firm Raises $1 Billion To Invest In Oil
  • 4 days Oil Prices Tank After API Reports Strong Build In Crude Inventories
  • 4 days Iraq Oil Revenue Not Enough For Sustainable Development
  • 4 days Sudan In Talks With Foreign Oil Firms To Boost Crude Production
  • 4 days Shell: Four Oil Platforms Shut In Gulf Of Mexico After Fire
  • 5 days OPEC To Recruit New Members To Fight Market Imbalance
  • 5 days Green Groups Want Norway’s Arctic Oil Drilling Licenses Canceled
  • 5 days Venezuelan Oil Output Drops To Lowest In 28 Years
  • 5 days Shale Production Rises By 80,000 BPD In Latest EIA Forecasts
  • 5 days GE Considers Selling Baker Hughes Assets
  • 5 days Eni To Address Barents Sea Regulatory Breaches By Dec 11
  • 5 days Saudi Aramco To Invest $300 Billion In Upstream Projects
  • 5 days Aramco To List Shares In Hong Kong ‘For Sure’
  • 6 days BP CEO Sees Venezuela As Oil’s Wildcard
  • 6 days Iran Denies Involvement In Bahrain Oil Pipeline Blast
  • 8 days The Oil Rig Drilling 10 Miles Under The Sea
  • 8 days Baghdad Agrees To Ship Kirkuk Oil To Iran
  • 8 days Another Group Joins Niger Delta Avengers’ Ceasefire Boycott
  • 8 days Italy Looks To Phase Out Coal-Fired Electricity By 2025

IEA Chief Sees No Oil-Price Recovery Until 2017

IEA Chief Sees No Oil-Price Recovery Until 2017

The International Energy Agency (IEA) expects oil prices to remain low through 2016, but forecasts a rebound to begin in 2017 as the current oil glut recedes and demand rises.

“Looking to 2016, I see very few reasons why we can see growth in prices,” Fatih Birol, the executive director of the IEA, told a news conference Wednesday in Paris on the sidelines of the United Nations climate conference. “I think 2016 will be a year where we will have a lower price environment.”

Related: Why Texans Might Soon Be Driving On Mexican Gasoline

Iran’s return to the global oil market will only contribute to the oversupply of oil, especially since OPEC, of which Iran is a member, agreed at its third consecutive ministerial meeting on Dec. 4 not to adjust its daily output to bolster prices. The ceiling remains at 30 million barrels per day, but the group has been exceeding this limit by an estimated 1.3 million barrels per day.

“There is a lot of oil in the market now, and 2016 demand in the market will be weaker,” said the chief of the Paris-based IEA, which advises its 29 member states on energy policy. “And at the same time we may well see Iran to come to the market if sanctions are lifted, which is going to increase the amount of oil in the markets.”

This week oil prices have been struggling to maintain a level of $40 per barrel. The price of the world benchmark, Brent crude, fell below $40 on Tuesday for the first time since the depths of the global economic crisis in early 2009, while a barrel of the U.S. benchmark, West Texas Intermediate, was under $37.

Related: 2016 Spells More Gloom For Oil Producers

The low price of oil has led the energy industry to slash investments in drilling and exploration, which could lead to a tighter supply. Birol noted that oil companies have cut such spending by about 20 percent so far this year, and may spend even less in 2016. “So 2016 may well be another year with lower prices and this will have implications of course for investments in the oil sector,” he said.

But this spending decline, combined with continued growth in demand, according to Birol, eventually could lead to “some surprises” in pricing. “We have never seen, in the last 30 years, two years in a row of oil investments declining, and this will have an impact on production in the next few years.”

In the meantime, though, Birol said he fears that a protracted period of low prices for oil, as well as for gas and coal, could inhibit the move to clean, renewable energy in some countries, especially those in the developing world, who may prefer to generate electricity by burning cheap, toxic coal rather than turn to more expensive energy alternatives.

Related: Strippers Suffering From Low Oil Prices

“We have been telling governments that it would be an historical mistake to lessen the support on renewables and efficiency as the price of fossil fuels become cheap,” Birol said. “Let me be clear: Lower oil prices are a risk for the transformation of energy.”

While Birol didn’t say how low he expects prices to go in 2017, he’s on the record saying he expects oil to rebound, albeit probably slowly, to about $80 per barrel in the next several years, specifically because reduced investment by oil companies should constrict supply significantly.

Crude oil priced at no higher than $50 per barrel is “not sustainable,” Birol said in an interview published Dec. 1 by The Wall Street Journal. He said he expects the reduced investment by oil companies to cut non-OPEC production by more than 600,000 barrels per day in 2016. But after that, he said, “we would expect to see upward pressure on prices.”

By Andy Tully of Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment
  • EdBCN on December 15 2015 said:
    IEA projections in the past have been wildly off the mark. This one probably is too.
  • Amvet on December 13 2015 said:
    "The International Energy Agency (IEA) expects oil prices to remain low through 2016, but forecasts a rebound to begin in 2017 as the current oil glut recedes and demand rises."
    Perhaps the IEA has not noticed that global demand rose last year and is rising this year ???? Locally, Chinese imports rose 7.6% in November.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News