SHAFAQNA- The United States will remain the world’s top source of oil supply growth up to 2020, even after the recent collapse in prices, the International Energy Agency said, defying expectations of a more dramatic slowdown in shale growth.
The agency also said in its Medium Term Oil Market report that oil prices , which slid from US$115 a barrel in June to a near six-year low close to US$45 in January, would likely stabilize at levels substantially below the highs of the last three years.
Oil prices deepened their decline after the Organization of the Petroleum Exporting Countries in November shifted strategy and declined to cut its own output, choosing to retain market share against rival supply sources such as U.S. shale oil.
“The market rebalancing will likely occur relatively swiftly but will be comparatively limited in scope,” the IEA said.
“The price correction will cause the North American supply ‘party’ to mark a pause; it will not bring it to an end.”
Supply growth of U.S. light, tight oil will initially slow to a trickle but regain momentum later, bringing production to 5.2 million barrels per day (bpd) by 2020, the IEA said. The outlook for Russian output is less optimistic.
“Russia, facing a perfect storm of collapsing prices, international sanctions and currency depreciation, will likely emerge as the industry’s top loser,” it said, forecasting production looked set to contract by 560,000 bpd from 2014 to 2020.
Partly as a result of lower non-OPEC output, the IEA predicted global demand for OPEC crude will rise in 2016 to 29.90 million bpd, after holding at 29.4 million bpd this year.
Other forecasters see lower prices and investment cuts to have a larger impact on non-OPEC supply. OPEC itself, in a monthly report on Monday, forecast demand for its oil this year would be higher than expected as its strategy to not prop up prices hits other producers.
The IEA’s latest report contrasts with its previous medium-term outlook published in June, which had higher oil demand forecasts and highlighted risks to supply such as from violence Iraq.
Now, the IEA expects global growth in oil demand to accelerate to 1.13 million bpd in 2016 from 910,000 bpd in 2015. Still, it saw the price decline as having a marginal impact on demand growth for the rest of the decade.
“Expectations of global economic growth have been repeatedly revised downwards in the last six months despite steeply falling prices, slashing prior forecasts of oil demand growth for the rest of the decade by about 1.1 million bpd,” the report said.
(Editing by William Hardy)