World Oil Outlook report paints a gloomy picture about oil industry
Published: 19:30 December 23, 2015
Fareed Rahman, Senior Business Reporter
Abu Dhabi: It may take many years for oil prices to recover and reach the level of more than $110 per barrel witnessed in June 2014, according to World Oil Outlook Report released by the Organisation of Petroleum Exporting Countries (Opec) released on Wednesday.
Opec expects the price of its basket of crudes to rise to $70 a barrel in 2020 and $95 a barrel in 2040, compared with$30.74 a barrel on Monday.
Oil prices have been falling continuously since last year as supply outstrips demand. From $115 per barrel in June last year, oil prices fell to less than $40 in recent times. Brent, the global benchmark, was trading at $36.63 per barrel on Wednesday at 4:32 UAE time.
The World Oil Outlook report focuses on many aspects of oil markets including supply and demand, investment and the challenges being faced by the industry. The report paints a gloomy picture about the global oil industry.
“The market instability has led to a number of projects being deferred or cancelled altogether, rig counts falling dramatically, costs being squeezed and redundancies being made,” Secretary General of Opec Abdullah Salem Al Badri said in the report.
He said supply and demand balance in 2015 has been one of oversupply, with stock levels rising to well above the five-year average.
“Despite this market instability, Opec has continued to be an efficient, reliable and economic supplier of oil.”
The report said that global energy demand is set to increase by almost 50 per cent in the period to 2040, with the overall energy mix continuing to be led by fossil fuels at almost 78 per cent.
Oil demand is projected to be at 110 million barrels per day by 2040 and the long-term demand is dominated by the developing Asia region, which accounts for 70 per cent of the increase by 2040.
At the global level, oil-related investment required to cover future demand for oil over the forecast period 2015—2040 is estimated at almost $10 trillion.
Economic factors have continued to weigh on the oil market, the report points out.
“The economic picture in the non-OECD region is gloomier than last year. The Chinese economy seems to be maturing and growth is decelerating faster than previously expected. Economic pessimism in Eurasia has also been exacerbated due to geopolitical developments,” the report said.
“Furthermore, from a policy point of view, additional climate change mitigation actions, as well as increasing support to renewable energy, the removal of subsidies, new upstream fiscal regimes and further energy efficiency targets have emerged as important factors. “
For the long-term, Opec sees oil demand increasing by more than 18 million barrels per day between 2014 and 2040, reaching 109.8 million bpd at the end of the forecast period. This figure is 1.3 million bpd lower than in the World Oil Outlook 2014 as a result of further energy efficiency improvements and climate change mitigation policies, as well as slightly lower long-term economic growth estimates.