“As with previous editions of this Report, the price assumptions (not forecasts) used as modelling input are derived from the futures curve. These averaged roughly USD 55/bbl for 2015, ramping up gradually to USD 73/bbl in 2020,” the report states.
The IEA notes that for the next few years, the global oil market is about to begin a new chapter in its history, which will see “markedly changing demand dynamics, sweeping shifts in crude trade and product supply, and dramatically different roles for OPEC and non OPEC producers in regulating upstream supply.”
At the same time, Citigroup’s projections are different and the price of a barrel of WTI oil is forecast to fall to as low as $20 per barrel “for a while” in 2015.
Since June 2014, global oil prices have dropped by about 50 percent due to oversupply in the market. The Organization of Petroleum Exporting Countries' (OPEC) decision in November 2014 not to cut oil output levels contributed to a further slump in prices.
According to the International Energy Agency, the recent drop in oil prices was neither “wholly unexpected nor unprecedented.” The report explains that the agency had previously pointed at “a looming surge in implied OPEC spare capacity, an expression of the supply/demand imbalance that would emerge if the producer group, faced with rising North American supply, held production above the ‘Call on OPEC and stock change.’”
Moreover, the agency highlights that according to the usual market logic, “the deeper and faster a price decline, the stronger the recovery; conversely, the faster a rally, the more severe the inevitable correction.”
