Oil prices may remain below $50 per barrel until 2023 — IEA report
Oil prices may remain below $50 per barrel until 2023, according to the October report the International Energy Agency (IEA) submitted to TASS.
“The uncertain outlook that could see the draw down of stocks falter is reflected in the fact that physical prices have weakened and this has brought down the front of the forward curve for Brent crude oil. The longer term offers little encouragement for the producers; the curve shows prices not reaching $50/bbl until 2023,” the agency says.
The IEA notes that the forecast for a decline in demand by 8.4 mln barrels per day for this year to 91.7 mln bpd is relevant only if OPEC+ fully complies with the terms of the deal to reduce production, and world reserves decrease by 4 mln barrels per day in the fourth quarter.
“With the 1.9 mb/d increase in the OPEC+ production ceiling currently planned for 1 January, there is only limited headroom for the market to absorb extra supply in the next few months. Also, there is a risk that the demand recovery is stalled by the recent increase in Covid-19 cases in many countries,” the agency says.
According to the estimates of the International Energy Agency, the demand for oil in July 2020 grew by 3.4 mln bpd amid an improvement in the epidemiological situation and the lifting of restrictive measures around the world. However, the second wave of COVID-19 and new quarantine measures are slowing down the growth in demand, the report said.
The IEA also maintained its forecast for growth in demand by 5.5 mln bpd next year to the level of 2020.
The updated OPEC+ agreement came into effect on May 1. The countries involved in the deal were to cut oil production by 9.7 million barrels per day during May-July.
Russia and Saudi Arabia reduced oil production by 2.5 million barrels per day each from the base level of 11 million barrels per day. The agreements will be in effect for two years, but from August to December 2020, the oil producing countries are to cut production by 7.7 million barrels per day, and from January 2021 to the end of April 2022 – they are to curtail production by 5.8 million barrels per day. The parameters of the deal may be revised in December 2021.