IEA says oil ‘price rout’ not over

PARIS (AFP) ― Oil prices are expected to keep sliding well into 2015, held down by weak demand and increased shale production, the International Energy Agency said Friday.

Global prices have collapsed by some 30 percent since June, and crude futures slumped on Thursday to lows not seen since September 2010, diving well below the $80-per-barrel mark.

The IEA said while there had been speculation that the high cost of shale extraction “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.”

“Our supply and demand forecasts indicate that barring any new supply disruption, downward price pressures could build further in the first half of 2015,” it added.

Prices were unlikely to reverse course anytime soon, as there are “deep structural changes” transforming the industry.

China, which in recent years has had a voracious appetite for energy, is now entering a less oil-intensive stage of growth, while technological innovations have unlocked shale resources in North America.

“A return to previous price highs may not be a close prospect, as it is increasingly clear that we have begun a new chapter in the history of the oil markets,” the IEA said.

Dealers were also betting that the 12-nation OPEC cartel, which is meeting on Nov. 27 in Vienna, would decide against cutting output quotas.

This is because OPEC is battling to maintain its foothold in the U.S. market against the flood of oil being extracted domestically from shale rock ― which had in part caused the global glut.

As pressure mounts on OPEC to slash output, Ali Al-Naimi, oil minister of the cartel’s kingpin Saudi Arabia, said that “talk of a price war is a sign of misunderstanding ― deliberate or otherwise ― and has no basis in reality.”

“We do not seek to politicize oil, nor do we collude against anybody. For us, it is a question of supply and demand. It is purely business,” he said on Wednesday.