Experts from OPEC and from the International Energy Agency (IEA)--the Paris-based body representing consuming countries--differ on the medium-term prospects for oil prices and supply. While OPEC feels the global slowdown will moderate both oil demand and prices for the foreseeable future, a top-level study from the IEA is worried that the lack of investment in expanding output capacity in Saudi Arabia and other Gulf exporters, as well as in Libya, could lead to significant shortages by the middle of this decade, and to much higher prices as soon as 2015. So who's right?
World oil demand will be a bit lower than originally forecast in 2012 as economic slowdown, particularly in the Eurozone, and high prices curb consumption, the IEA predicted in mid-November 2011. But, at 90.47 million barrels a day, it's still more than in 2011, when total demand was expected to have reached 89.16 million b/d. Demand from OPEC countries, the IEA noted, has been running ahead of output, and while some production had resumed from Libya, the Agency anticipates that much more time will be needed before Libya's output returns to the levels attained before the overthrow of the Gaddafi regime. In 2012, demand from OPEC--which accounts for about one third of global supplies--was forecast to reach 30.4 million b/d, about the same as in 2011 despite the economic slowdown in the US and Europe.
As a result, the Paris-based Agency said, prices are likely to remain "stubbornly high". Unforeseen political turbulence in the Arab world, supply disruption in Nigeria or conflict which erupts as a result of Iran's nuclear ambitions, could push prices up still more, the Agency--which represents more than two dozen of the world's leading oil consuming countries--added. Oil prices have been rising on an annual basis since 2009 and could well have continued this trend at the end of 2011, according to the IEA. "Prices are still quite high," IEA Director Maria van der Hoeven told the international media in Riyadh in November. If they remained at this level for a longer period, "it will have an impact on economic recovery, especially in the developing countries," she added.
Earlier this year, the US's Energy Information Agency predicted that oil prices will average $100.25 a barrel in 2012, and $103.75 in 2013.
By mid-January, the price of North Sea's Brent crude--a global benchmark--was on target to set an all-time annual high. In spot terms, it was priced at around $113 a barrel, and although this was lower than the peak of $125 reached after the disruption of...