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Page added on November 14, 2014
IEA sees new era, no quick rebound in oil prices
The oil market has entered a new era with lower Chinese economic growth and booming U.S. shale output, making a return soon to high prices unlikely, the West’s energy watchdog said on Friday.
The International Energy Agency, which typically refrains from predicting oil prices, said in its monthly report that prices could fall further in 2015 after declining to their lowest levels since 2010 below $80 per barrel LCOc1.
“While there has been some speculation that the high cost of unconventional oil production might set a new equilibrium for Brent prices in the $80 to $90 range, supply/demand balances suggest that the price rout has yet to run its course,” the IEA said.
Barring any new supply disruption, “downward price pressures could build further in the first half of 2015”, it said.
Oil prices have fallen 30 percent since peaking in June, pressured by a strong U.S. dollar and rising U.S. light oil output while largely ignoring the impact of Libyan supply disruptions.
Benchmark Brent crude oil was up 50 cents at $77.99 a barrel by 0910 GMT on Friday, having dropped from above $115 in June.
“Pressure on OPEC to reduce production is building, but at the time of writing there appeared to be no clear consensus on a formal supply cut ahead of its meeting in Vienna later this month,” said the IEA, which represent industrialised nations.
For 2015, the IEA left its forecast of global oil demand growth unchanged at 1.13 million from a five-year annual low of 680,000 bpd in 2014, saying the macroeconomic backdrop was expected to improve.
While China, the top source of incremental oil demand in recent years, has entered a less oil-intensive stage of development, years of high prices have helped new technology release oil resources in North America and elsewhere.
“It is increasingly clear that we have begun a new chapter in the history of the oil markets,” the IEA said.
Total global oil deliveries edged up in October and were 2.7 million bpd higher than the year before as higher OPEC production added to non-OPEC supply growth of 1.8 million bpd.
OPEC output eased by 150,000 bpd in October to 30.60 million bpd, remaining well above the group’s official 30 million bpd supply target for a sixth month running. The IEA said it expected demand for OPEC oil next year at around 29.2 million bpd, 100,000 bpd lower than its previous forecast.
However, the IEA said supply risks remained “extraordinarily elevated” and could be exacerbated by falling prices.
“The two countries responsible for a recent recovery in OPEC supply growth, Iraq and Libya, are both in the throes of vicious conflicts,” it said.
Price drops cast new doubt on Iraq’s ability to fund capacity growth while Venezuela and Russia were also suffering from plummeting prices, it said.
20 Comments on "IEA sees new era, no quick rebound in oil prices"
Northwest Resident on Fri, 14th Nov 2014 10:56 am
America’s designated bogeyman sounds like he’s expecting long term lower oil prices too:
Russia Braces for ‘Catastrophic’ Drop in Oil Prices
“President Vladimir Putin said Russia’s economy, battered by sanctions and a collapsing currency, faces a potential “catastrophic” slump in oil prices.
Such a scenario is “entirely possible, and we admit it,” Putin told the state-run Tass news service before attending this weekend’s Group of 20 summit in Brisbane, Australia, according to a transcript e-mailed by the Kremlin today. Russia’s reserves, at more than $400 billion, would allow the country to weather such a turn of events, he said.”
http://www.bloomberg.com/news/2014-11-14/putin-says-russia-preparing-for-catastrophic-oil-slump.html
shortonoil on Fri, 14th Nov 2014 11:10 am
“It is increasingly clear that we have begun a new chapter in the history of the oil markets,” the IEA said.
The ability of petroleum to power the economy is not unlimited, it would be ridiculous to assume that it would be. Yet, that is the underlying assumption that most analysts have been making. We are not entering a new era, we are being slapped in the face with what has always been true, but until now conveniently ignored.
Petroleum has been of unmeasurable benefit to society. It has been the world’s most successful energy provider. But the obsession with counting barrels has ignored the reality that not all barrels are equal, or that the value of a barrel degrades with time. This has left us with a false sense of security as to what the limits of petroleum really are; we are now witnessing the inevitable result of those limits – declining price:
http://www.thehillsgroup.org/depletion2_022.htm
The unwinding of the oil age will be complex, and it will present many opportunities for the protagonists in the oil story to state their opinions. However, without a realistic, and comprehensive understanding of the dynamics taking place, they will remain what they are: opinions.
http://www.thehillsgroup.org/
shortonoil on Fri, 14th Nov 2014 11:16 am
NR,
Interesting – our site has seen an avalanche of hits from Russian servers in the last month. It seems doubtful that it is a coincidence.
Northwest Resident on Fri, 14th Nov 2014 11:27 am
shortonoil — That IS interesting, very much so. Do you have web traffic analytics software that allows you to group those hits by referrer, IP, and/or other categories. Reason why I ask is because it would be interesting to know how that traffic is getting to your website. Is it coming from a link or two on some web page out there in internet land, or is most of it coming from a single IP/Domain? Knowing where your traffic is coming from and often times is very illuminating information, certainly critical information for marketing departments to know. Did the Russian government post some pages on their website that have one or more links to your website? If so, find that page (or pages), get them interpreted (run it through an online interpreter — good enough). It will give you information that will prove very interesting, perhaps “actionable”. Or, are Russians suddenly googling “peak oil” and the majority of your traffic is coming from a groundswell of general interest in the subject?
Inquiring minds want to know!
Poordogabone on Fri, 14th Nov 2014 11:49 am
The only thing thing that we can predict for sure as far as oil prices is its unpredictability. The fact that IEA is forecasting a continuation of the slump in oil prices makes me think that a rebound will come sooner than later. I predict that Crude Oil (WTI) will go back into the $90’s soon after the new year but I wouldn’t take a chance of putting my money on it.
steve on Fri, 14th Nov 2014 1:10 pm
This is where it gets tricky trying to explain peak oil to people….there eyes just glaze over….it is easier for them to think tons of oil…no problem from here on out….
shortonoil on Fri, 14th Nov 2014 1:48 pm
NR,
The majority of the hits have come from seven (7) domains. Quit a few. We’ll try to tract them back to a source. The Russian’s obviously know something is coming, which is not surprising as the Saudis have been making similar statements. The Hill’s Group is not the only bunch of engineers on the planet who didn’t fluke thermo (twice).
Thanks for your suggestions, and old IT guy is good to know. Any other suggestions are always welcome.
Northwest Resident on Fri, 14th Nov 2014 2:24 pm
shortonoil — “an old IT guy is good to know.”
Hey, I’m not THAT old… 🙂
Not just a run-of-the-mill IT guy by the way, a web developer specialist — or so it says on my resume.
Websites are amazing marketing tools if owners know how to use them and know how to interpret the data. I was on the corporate web dev team for a major name brand high tech firm that drove their sales worldwide through their website. And the web dev team wasn’t even under the IT department — it was under the marketing department. The marketing managers (one for each product line) were intensely interested to know where the traffic was coming from. Whenever they identified a new source of interest in the product by analyzing the traffic, they would issue new orders to develop website content specifically for that newly identified target group. They would make every effort to figure out what made that particular new interest group “tick”, and on one occasion the IT/engineering department was tasked with developing a completely new product to meet the needs of a new target group.
If you can figure out what is driving the sudden interest in your website, you may be able to identify a business opportunity — or two, maybe more. Best of luck to you!
BTW, I’m sure none of this is new info to you — just stating it for the record…
nemteck on Fri, 14th Nov 2014 3:00 pm
The Hill Group published graphs and text on the future of the price of oil. http://www.thehillsgroup.org/depletion2_022.htm It says:
The Maximum Consumer Price curve is curtailed at 2020 at $11.76/ barrel. At this point petroleum will no longer be acting as a significant energy source for the economy.
Where are the oil fields that can produce at that refinery gate price? The wellhead production price must be $6-8/b counting all other costs such as taxes and transport, etc.
The Hill Group reported by shortonoil (on Sun, 26th Oct 2014 8:10 am) projected that in 2030-2035 the cost will be $0.00. Further, the Hill Group reported by shortonoil (on Fri, 7th Nov 2014 8:16 am) published the table
2012….$104.60
2013……96.20
2014……87.40
2015……77.30
2016……65.90
2017……54.20
2018……41.20
2019……26.90
I plotted this table, and behold, it is a steep straight line down which hits $0.00 oil in May 2021. Such a straight line is suspicious. Why would oil fall year after year in a straight line? One would think the slope would taper off so to approach the $0.00 oil price slowly. It shows to me that the Hill Group has no skills in math. When their straight line hit $0.00 it continues unabated downwards, meaning, that after May 2021, one would get paid when buying oil. Even my 11 year old grandson understands (I teach him math since 5 years) that one cannot let extrapolated curves float without restriction.
There are other strange projections. In 2019 the oil price is $26.90 and in 2020 it dropped to 16.76 (note the precision in price). Between 2019 and 2020 there must be a catastrophic event, only, and already, known to the Hill group. So, why not telling us what will happen in order to prepare? Then from 2020 to 2030-2035, the oil drops only about $1.12 to $1,67 per year to make it to their earlier $0.00 prediction.
shortonoil on Fri, 14th Nov 2014 3:09 pm
Thanks NR,
I wrote AI apps for five years; burned out – went back to consulting. You still have to use your head, but you don’t have to put your brain through a meat grinder. Anyone who can take that environment for five years is in my opinion “old”.
There is not much question as to “why” so many Russians are interested. The oil price decline has taken most of the market by surprise. We had concluded that it was going to happen more than a year ago, but we didn’t say anything because we didn’t think anyone would believe it. Everyone was convinced that oil was going to the moon, including most of the Majors. I should have named this group, “The Cassandra’s Association”.
Northwest Resident on Fri, 14th Nov 2014 3:20 pm
shortonoil — Approaching each new task with a pre-scrambled brain is what keeps me young and going strong! It also makes the meat grinder easier to squeeze through.
Thanks for the info on those Russians hitting your website. Things are definitely getting interesting!
shortonoil on Fri, 14th Nov 2014 3:33 pm
nemteck
It you go to the bottom graph of:
http://www.thehillsgroup.org/depletion2_022.htm
you will see exactly where that curve came from, it is the bottom portion of a skewed logistic curve. We even give you the equations it was derived from.
The reason that we don’t go past 2020 is that at some point the industry will begin extracting the embedded energy in its infrastructure. We calculate that it is equivalent to 87 Gb. We don’t know exactly when that will start happening, so we show arrow starting at about $30 on that same bottom graph. But one thing is for sure, prices will fall until all the high cost producers are gone, and E&D has been terminated. As I stated yesterday petroleum may still act as an energy carrier, but it will no longer be an energy source. Once the world’s capital structure has been absorbed, it will not be replaced.
http://www.thehillsgroup.org/
Harquebus on Fri, 14th Nov 2014 4:25 pm
The IEA gets too much credence. Personally, I can’t be bothered with them anymore.
penury on Fri, 14th Nov 2014 4:25 pm
When I read articles like this, I have to wonder. I know hat the price of oil is dropping, I also understand that China is reducing manufacturing because the rest of the world is lowering consumption. I attempt to understand, w2hat is going on in Detroit? What is going on with the children who have a disease which might be linked to the polio virus. How many undocumented people have crossed our southern borders in the last 12 months. How many cities in the U.S are in or close to bankruptcy? With Europe a basket case, how much has their use of petroleum been reduced? How are the younger people in this or any other country going to be able to fford anything going forward? All I can find in the MSM is propoganda for the new war this country is trying to start with Russia. Damn Putin anyway, why won’t he just shoot at us so we can nuke him like we need to.
Cloud9 on Fri, 14th Nov 2014 5:56 pm
Pen, first off you cannot just nuke Putin. He has nukes too. Even a modest nuclear exchange will shut down the grid in our major cities. Turn the lights out in Miami and within a week they will start eating each other. In a couple of months they will have eaten the rest of Florida. Be careful what you ask for. You may get it.
jmb on Fri, 14th Nov 2014 6:01 pm
A couple weeks ago I said we were going to have lower oil prices in the future and my post was deleted. I also said the U.S. would emerge victorious from the current turmoil. I guess that wasn’t too popular either.
jmb on Fri, 14th Nov 2014 6:12 pm
On the other hand… a few people stand to gain, or lose, a lot of money in the markets, and so they purposely put out mis-information to steer many investors to the wrong side of the market.
Dave Thompson on Fri, 14th Nov 2014 6:58 pm
http://www.countercurrents.org/macleod131114.htm
Makati1 on Fri, 14th Nov 2014 11:49 pm
ANYONE who believes the “news” from the Empire’s Ministry of Propaganda (MSM) deserves to be eliminated in the first round of collapse. Especially the financial rags that are deep into the business of lies to keep the suckers/investors coming back for more pain while transferring as much as possible up to the elite.
If you read news from multiple sites and countries you can get a less foggy view of world events. The quick drop of oil prices was NOT caused by a sudden decrease in oil demand. Look behind the curtain and you will find the elite pulling strings as always. But then, their declining success in the last 15 years tells me that this is going to hurt the West more than their supposed enemies.
Putin has ~$400B in reserves and a country brimming with natural resources. It has China at its back for any support needed. China has ~$4T to get rid of while it still has some value and would be glad to invest in Russia, including loans based on natural resources for collateral, China’s favorite method of help.
I’m glad I have very little need of oil’s products today. I can just wait and see…
BTW: The US military is already demanding 80,000 troops to be sent back to Iraq. I guess the MIC is not getting rich fast enough. Gotta spill more blood, American and Iraqi, in an on-going, but very profitable, lost cause.
Davy on Sat, 15th Nov 2014 6:03 am
OH, Mak, why should China give Russia their back? China is salivating for a leveraged buyout of the Russian economy. China will piece Russia out and consume what they need. China has never given anyone their back. China is a self-interested country of the highest degree. They avoid foreign entanglements and wait for opportunities. They have no interest in bailing Russia out. Russia may or may not win this Putt gamble. Putt is upping the ante. If he plays the energy card it will be all in. Dangerous geopolitical times ahead.