HOUSTON – Oil prices will more than double by 2020 as current low prices lead drillers to cut investment in new production and gradually reduce the glut of crude, the head of a group of oil-importing countries said Monday.
Fatih Birol, executive director of the International Energy Agency, said oil would rise gradually to about $80 a barrel.
Oil prices shot to more than $100 a barrel in mid-2014 before a long slide sent them crashing below $30 last month.
“There was a rise, there will be a fall, and soon there will be a rise again,” Birol said on the opening day of a huge energy-industry conference that will feature addresses by the oil minister of Saudi Arabia, the secretary-general of OPEC, the president of Mexico, and U.S. Energy Secretary Ernest Moniz.
Birol’s group issued a fresh outlook on energy markets. It forecast that 4.1 million barrels a day will be added to the global oil supply between 2015 and 2021, down sharply from growth of 11 million barrels a day between 2009 and 2015.
A year ago, the Paris-based IEA, an organization of 29 major oil-importing nations including the United States, had forecast a relatively swift recovery in oil prices, but the decline continued, with the price for a barrel of crude hitting levels last seen in 2003.
Experts underestimated the ability of shale-oil producers in the United States to withstand falling prices — for a time — which, combined with OPEC refusing to cut production, led to a glut. The same experts now think that U.S. production, along with new supplies from Iran, which has been freed from international sanctions, will blunt what otherwise might be a sharper run-up in prices.
Nobody saw the shale-oil boom coming, and it has changed the market, said Neil Atkinson, who edited the IEA report released Monday.
“Producers everywhere around the world are having to accept that $100 a barrel is not something that is likely to return soon,” Atkinson said. He and Birol declined to blame low oil prices on OPEC’s decision to keep pumping away to preserve market share in the face of rising competition from the U.S. and elsewhere.
Now, IEA says, investment in future oil exploration and production is declining for a second straight year — the first back-to-back downturn in 30 years. U.S. shale oil production will fall in 2016 and 2017 before recovering with higher prices, the group predicted.
Meanwhile, Saudi Arabia, Russia, Venezuela and Qatar have discussed freezing production if other oil countries go along with a strategy to boost prices. On Monday at IHS CERAWeek, an annual energy-industry conference in Houston, OPEC Secretary General Abdalla Salem El-Badri called a potential freeze “a first step” that, if it sticks, could be followed by other measures, which he did not specify.
The price of U.S. crude soared more than 6 per cent Monday. A barrel of benchmark U.S. oil rose $1.84 to $31.48 a barrel in New York. Brent crude, the international benchmark, climbed $1.68, or 5.1 per cent, to $34.69 a barrel in London. The price of wholesale gasoline jumped 4 per cent.
Oil prices have tumbled 70 per cent since mid-2014, and gasoline prices have followed. The U.S. Energy Information Agency expects an average price of $1.98 per gallon nationwide this year. The last time gasoline averaged less than $2 for a full year was 2004.
Low oil prices have had devastating effects on communities that rely on the energy industry. Home sales have fallen sharply in North Dakota and the West Texas cities of Midland and Odesa, and more recently in Houston.
This story has been corrected to read that the last time gasoline, not oil, averaged less than $2 for a full year was 2004.