Crude-oil prices will rebound much less than expected in the next four years, OPEC said Tuesday, forecasting that oil demand won’t rise as quickly as once thought and petroleum supplies will be resilient.
The Organization of the Petroleum Exporting Countries will account for much of the world’s growing oil production, however, and its share of the global market will increase as U.S. output from shale fields slows down, the 14-nation cartel says in its annual World Oil Outlook.
The outlook represents the cartel’s best estimates of the medium- and long-term fortunes of the oil industry. It comes as the crude market faces a challenging period of stubbornly low prices that remain down over 60% from their levels in mid-2014, and OPEC is heading into a meeting Nov. 30 where it will allocate production cuts designed to lift prices.
But OPEC’s outlook is dour for oil investors, saying it now assumes prices will rise by $5 a barrel in the medium term, reaching $60 a barrel in nominal terms by 2020. That is $20 a barrel less than the baseline figure of $80 a barrel it used in 2015 for the beginning of the next decade.
This year, OPEC said it expects prices to average about $40 a barrel for the cartel’s basket of crudes, a combination of each type of grade produced by its member countries. OPEC’s basket generally trades for less money than the international benchmark Brent, which was trading below $46 a barrel on Wednesday evening in London.
Those loose prices haven’t boosted consumer demand as much as OPEC once thought, the report said. The cartel blamed the lingering impact of the financial crisis and high taxes on oil products.
“Scars from the economic crisis such as high household debt levels, fiscal imbalances and high unemployment, combined with industry investment cuts, have limited the propensity to consume,” it said.
Global demand for oil will now increase by 1 million barrels a day more than foreseen last year to 99.2 million barrels a day in 2021, OPEC said.
Low oil prices will also lead to a production decline for the cartel’s rivals, allowing OPEC to capture more market share. The share of OPEC crude in the global liquids supply is expected to increase from around 34% today to around 37% by 2040, it said.