IEA predicts oil price to rebound to USD 100 a barrel

Friday, October 9, 2009

International Energy Agency (IEA) reported that crude oil prices will recover to more than 100 dollars a barrel as soon as the economomies around the world recover and will top 200 dollars in 20 years time.

The report said that market imbalances could temporarily cause prices to fall back, due to slowing cyclical demand. Its World Energy Outlook has come to this conclusion largely because it believes companies will struggle to pump enough new oil to offset the steep production declines of the world’s older fields.

The industry will have to invest USD 350 billion each year until 2030 to counter the steep rates of decline of existing fields and find enough extra oil to satisfy the growing demand of countries such as China.

The agency found that output from the world oil fields is declining at a natural rate of 9% per year. This decline rate is curtailed to 6.7% when current investments to boost production are made. However, even with such investments, the decline rate worsens significantly to 8.6% by 2030.

The declining rates are steeper than the industry had previously assumed. They are also slightly steeper than an earlier draft of the report because the IEA has expanded the study to 800 oil fields, adding 250 smaller fields.

The stark assessment comes as companies cancel projects from Kazakhstan to Canada because the collapse in oil prices makes them uneconomical.

Oil supply won`t grow as much as needed in the next few years and when demand picks up, prices will skyrocket again. As Merrill Lynch used to say "Be Bullish".


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