IEA Predicts that Low Prices are Not Temporary | Russell T. Rudy Energy LLC
The International Energy Agency predicts that oil prices will not return to previous levels in the near future. Prices have dropped 30% since June due to a strong U.S. dollar and increased shale oil production. These factors, in concert with lower Chinese economic growth, will prevent a price recovery during the first half of 2015. In fact, the IEA feels that prices could fall even further during that time.
IEA’s prediction of global oil demand of 1.13 million barrels of oil per day (bopd) remains unchanged, but the body notes that both OPEC and non-OPEC production are rising. OPEC members are already exceeding their aggregate quota of 30 million bopd by 600,000 bopd. Further, the shale revolution in the U.S. shows no signs of slowing.
There is already growing pressure on OPEC to cut production, but any agreement prior to their meeting in Vienna later this month is doubtful. However, there is always the possibility of supply disruptions. Falling prices could compromise Iraq’s ability to fund output growth, and ongoing conflicts in that country and Libya could depress production. Venezuela and Russia are also suffering the economic consequences of plummeting prices. However, the implications of all this are unclear.
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