IEA Says Oil to Rise Gradually to $80 by 2020

Oil is unlikely to return to $80 a barrel before the end of the decade, despite unprecedented declines in investment, as yearly demand growth struggles to top 1 million barrels per day, the International Energy Agency said on Tuesday.

In its World Energy Outlook, the IEA said it anticipates demand growth under its central scenario will rise annually by some 900,000 barrels per day to 2020, gradually reaching demand of 103.5 million bpd by 2040.

The drop in oil to around $50 a barrel this year LCOc1 has triggered steep cutbacks in production of U.S. shale oil, one of the major contributors to the oversupply that has stripped 50 percent off the price in the last 12 months.

“Our expectation is to see prices gradually rising to $80 around 2020,” Fatih Birol, the executive director of the IEA, told Reuters ahead of the release of the report.

“We estimate this year investments in oil will decline more than 20 percent. But, perhaps even more importantly, this decline will continue next year as well.”

“In the last 25 years, we have never seen two consecutive years where the investments are declining and this may well have implications for the oil market in the years to come.”

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza