LONDON: Oil prices slumped Tuesday after the International Energy Agency predicted that global oil prices will recover only partially over the next five years.
US benchmark West Texas Intermediate (WTI) for March delivery tumbled $2.25 to $50.61 a barrel compared with Monday’s close.
Brent North Sea crude for March slid $1.47 to stand at $56.87 a barrel in late London deals.
Citing a major shakeup in the oil markets, the IEA watchdog said in its five year forecast that prices will recover from about $50-55 per barrel but remain considerably below the more than $100 per barrel reached before prices began to fall in June.
“The global oil market looks set to begin a new chapter of its history, with markedly changing demand dynamics, sweeping shifts in crude trade and product supply, and dramatically different roles for OPEC and non OPEC producers in regulating upstream supply,” the IEA said.
It added that it sees market rebalancing occurring “relatively swiftly”, with increases in inventories halting mid-year and the market tightening.
“Though the IEA trimmed its long-term supply forecasts, it cut its demand estimates too and warned that lower oil prices will not necessarily boost demand growth as strongly as it might be expected,” said Fawad Razaqzada, technical analyst at Forex.com trading group.
The Organization of Petroleum Exporting Countries had Monday forecast non-OPEC oil supply growth of 850,000 barrels per day for 2015, down from its previous estimate and led by a cut in US output.
A survey by US oil services firm Baker Hughes Inc released Friday showed that the number of rigs drilling for oil in the United States fell by 83 to 1,140 in the week to February 6.The dip followed a cut of 94 rigs the previous week.
The drop, coupled with announcements of deep cuts in capital spending by major oil companies, suggests tighter supplies in the future.
Oil prices plunged 60 percent between June and January, largely owing to a surge in global reserves boosted by robust production of oil from US shale rock.
The sharp decline will meanwhile provide “some boost” to global growth and should allow states to “reassess” fiscal policies to sustain economic activity, the G20 leading economies said in a draft communique at their meeting in Istanbul Tuesday.