Oil Price Forecast – 2015 to Medium Term
Oil prices have been forecasted to shoot back up again, according to the annual World Oil Outlook released by the Organization of Petroleum Exporting Countries (OPEC).
For the OPEC reference basket (ORB) price, “a constant nominal price of $110/b is assumed for the rest of the decade, corresponding to a small decline in real values. Moving further forward, real values are assumed to approach $100/b in 2013 prices by 2035, with a slight further increase to $102/b by 2040. Nominal prices reach $124/b by 2025 and $177/b by 2040”, according to the report.
Brent Crude oil is currently at $80/b, while the WTI Crude Oil price is at $78/b.
The report adds that these are assumptions and should not be considered as indicative of any desired or targeted price.
According to the report, on the demand side, the world oil demand will keep rising by at least 1 million barrels per day throughout 2019. Demand for oil outside the Organization for Economic Cooperation and Development (OECD) is expected to surpass OECD demand for the first time in 2015.
While OPEC expects average oil use per car or truck to decline by 2.2 percent per year, fleets of vehicles in China, India and other emerging markets is expected to increase to more than 1 billion additional cars by 2040.
The World Oil Outlook stresses that “economic growth is not only a key driver of oil demand, but it is also a major source of uncertainty of the required volumes to be invested.”
On the supply side, the report points out that the primary driver of recent non-OPEC output has been the US and Canada. While some increases has been observed in Russia and China, but most other non-OPEC regions have seen declines.
Over the 2013–2019 period, total non-OPEC oil is to increase steadily by 6.4 mb/d over these six years from 54.2 mb/d in 2013 to 60.6 mb/d in 2019.
The amount of OPEC crude required will fall from just over 30 mb/d in 2013 to 28.2 mb/d in 2017, and will start to rise again in 2018.
By 2019, OPEC crude supply, at 28.7 mb/d, is still lower than 2013 supply.
OPEC supplies 40 per cent of the world’s oil.
The OPEC secretary general, Abdalla El-Badri, pointed out that oil prices move because of speculation, as well as supply and demand factors. However, he says supply outstripping demand by 600,000 barrels per day, as it does now, does not justify a 28 percent price drop since mid-June; pointing out the bear market is mostly due to speculation.
On the falling price of crude oil, “We are concerned but not panicking,” said El-Badri at a press conference to launch the report in Vienna last week. “This situation of low price cannot continue, because if it continues, most of the investment will be stopped”.
Shale drillers are higher-cost producers, and will be hurt by further declines in prices before members of OPEC, with about 50 percent of shale supply likely to be stopped unless the oil price recovers.
At $80/b, output from shale producers would grow by 5 percent, down from a previous forecast of 12 percent, according to New York-based ITG.
At $75/b, growth would fall 56 percent to about 500,000 barrels a day, according to Vikas Dwivedi, an oil and gas economist from Macquarie. Closer to $70 a barrel, the growth rate would drop to zero, he said.
The World Bank and the IMF, also predict that oil price will rise as well.
The World Bank released its Commodity Forecast in July 2014, which predicts that world crude oil price will increase from $104/b in 2013 to $106/b in 2014.
According to the Commodity Price Forecast from the IMF, spot average price for crude oil will stay at $104/b in 2014.
Yinka Abraham