Oil prices expected to slide well into 2015

Oil prices are expected to keep sliding well into 2015, held down by weak demand and increased shale production, the International Energy Agency said yesterday, as it maintained its full-year forecast for slow global consumption growth.

Global crude futures slumped on Thursday to lows not seen since September 2010, with London’s Brent and US benchmark Texas crude for delivery in December diving well below the US$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 US$80 to US$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.

Dealers are speculating over whether the 12-nation OPEC cartel, which is meeting on November 27 in Vienna, would cut output quotas and thereby help to shore up prices.

Some observers believe that OPEC might decide against turning off the taps as it seeks to maintain its foothold in the US 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.

In a report to the G20 group of leading industrial powers ahead of a summit in Brisbane this weekend, the International Monetary Fund said the “recent appreciable fall in oil prices, if sustained, will boost growth.”

But the lower prices are hurting some crude exporters, including Venezuela, Iran and Russia. The latter two are also struggling with the impact of Western sanctions.

Prices have slumped by over 30 percent since June, when the Islamic State offensive in Iraq had pushed up costs.

But they have since collapsed on the back of abundant supplies, tepid demand and the strong dollar.