LONDON: Crude oil value tumbled almost 60 per cent over the last six months with both of the world’s crude oil benchmarks now trading below $50 a barrel as supplies of high quality, light oil from the US and Canada have overwhelmed demand at a time of lackluster global economic growth.
Oil prices may have further to fall and a rebound could take some time, despite increasing signs that the downtrend will end, possibly in the second half of this year as North American supply growth slows, the West’s energy watchdog said yesterday.
The Opec has not cut output despite the collapse in prices.
‘How low the market’s floor will be is anybody’s guess. But the sell-off is having an impact. A price recovery ‘“ barring any major disruption ‘“ may not be imminent, but signs are mounting that the tide will turn,’ the International Energy Agency (IEA) said in its monthly report.
The IEA, which co-ordinates energy policies of industrialised nations, said lower prices would eventually start to curb output and boost demand.
‘The most tangible price effects are on the supply front. Upstream spending plans have been the first casualty of the market’s rout. Companies have been taking an axe to their budgets, postponing or cancelling new projects, while trying to squeeze the most out of producing fields,’ it said.
The agency cut its outlook for 2015 non-Opec supply growth by 350,000 barrels per day (bpd) to 950,000 bpd, down from record growth of 1.9 million bpd in 2014.
The IEA cut its output growth forecasts for Canada and the US by 95,000 bpd and 80,000 bpd respectively as well as for Colombia by 175,000 bpd and by 30,000 bpd for Russia.
It said supply growth wasn’t slowing more quickly in North America because many producers appeared to be well hedged against short-term price drops.
Downward revisions for non-Opec supply growth mean demand for Opec oil will average 29.8m bpd in the second half of this year ‘“ just shy of Opec’s official target of 30m bpd.
For the whole of 2015, the IEA raised its estimate of the demand for Opec crude by 300,000 bpd to 29.2m bpd.
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