By Sebastine Obasi
THE lingering glut in the oil market may soon be a thing of the past, as the International Energy Agency, IEA, predicts that oil prices would rise in the second half of the year as falling non-Organisation of the Petroleum Exporting Countries, OPEC, supplies and rising global demand bring the market into balance.
Crude oil prices have been climbing recently, in part in anticipation that OPEC would agree to freeze production at current levels or even trim output.
But the IEA said: “If there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited.” Later in the year, however, crude oil prices could rise “well above” the current levels of about $40 a barrel, it added.
The Agency also said that petroleum demand would grow to about 1.2 million barrels a day this year, as India, where consumption is rising at an 8 percent annual rate, possibly replaces China as the “main engine of global demand growth.”
It explained that low prices have discouraged oil companies from investing, and as a result, the U.S. shale oil boom has dissipated.
According to IEA, by early April, the U.S. drilling rig count had fallen nearly 80 percent from the October 2014 peak. U.S. oil production reached as high as 9.6 million barrels a day, mb/d, in June 2015, but this month slipped below 9mb/d, for the first time since October 2014.
Falling U.S. output is the main reason the IEA is forecasting a 700,000 kb/d drop in non-OPEC oil production. “The much-anticipated slide in production of light, tight, oil in the United States is gathering pace,” it said.
Also, the IEA, in its newly released Oil Market Report, OMR, for April, said growth in global oil demand will ease to around 1.2 million mb/d in 2016, below the 1.8 mb/d expansion of last year, as notable decelerations take hold across China, the U.S. and much of Europe.
It further stated that preliminary data for the first quarter of 2016 reveal that this is already occurring, with year-on-year growth down to 1.2 mb/d, after gains of 1.4 mb/d in the final quarter of 2015 and 2.3 mb/d in the prior quarter.