IEA sees oil price of $80 enough to balance market in 2020

MOSCOW, Nov 16 (PRIME) -- The oil price of about U.S. $80 per barrel will be enough to balance the market by 2020, the International Energy Agency (IEA) said on Wednesday in the baseline scenario of its World Energy Outlook 2016.

Still, the market may reached a balanced state even under a lower oil price, the agency said.

The agency expects the import oil prices to grow to $79 per barrel in 2020, to $111 per barrel by the end of 2030 and to $124 per barrel by 2040 in the prices of 2015.

The growth is based on several factors. Companies need to invest in new production to satisfy the growth of demand for oil, and all cases envisage production becoming more expensive in 2040 than today. The depletion of light-to-recover oil and transition to production of hard-to-recover oil will lead to an increase of cost of production in the sector, the IEA said.

But there are also geopolitical factors. Main owners of cheap oil resources in OPEC will continue their efforts to protect oil prices that are higher than they may be on the basis of the cost of production, the agency’s analysts said.

The IEA also expects Russia’s daily oil output to contract to 10.9 million barrels by 2020 from the current level of about 11.1 million barrels, and to fall further to 10.5 million barrels by 2025, to 9.8 million barrels by 2030, to 9.3 million barrels by 2035, and to 8.5 million barrels by 2040.

In general, Russian oil producers survived the oil price fall better than most other companies, and many of them managed to keep and even increase capital expenditures in rubles in 2015. Still, local oil producers are facing risks of changes in the country’s financial conditions, including contraction of incomes, the agency said.

Even if taxes remain the same, Russian companies will not win much from higher oil prices due to protection from low oil prices provided by Russia’s taxation system, the agency said.

The IEA said that the daily oil output of the U.S. will grow to 14.7 million barrels by 2025 and then fall to 12.8 million barrels by 2040. Saudi Arabia’s production may increase to 13.7 million barrels per day by 2040 from 12.2 million barrels in 2015, which will make it the top oil producer by the end of the period.

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