OPEC: BELOW $100
The Organization of the Petroleum Exporting Countries said Friday that oil prices will remain below $100 a barrel in the long term, but should bounce back from current levels as demand for crude will rise more than currently expected.
The forecast comes as the oil cartel's members—many of which need a price of over $100 a barrel to balance their budgets—have been grappling with free-falling oil prices. Late last year, the group abandoned its traditional role of cutting production to bolster prices, triggering a global battle for market share among its members and others, including U.S. shale-oil producers.
International crude prices have fallen another 15% in the past few weeks, after an early December decision by OPEC to stand pat on that strategy.
In extracts published Friday from its closely watched World Oil Outlook, OPEC said it now assumes the price of the reference basket of crude oil produced by its members would be $70 a barrel in 2020, rising to $95 a barrel by 2040. That compares with $31.49 a barrel for the basket as of Thursday. A barrel of the global oil benchmark Brent was trading at $36.74 around midday in London, down 0.9% on the day.
The full text of the report is expected to be released next week.
The price assumptions, which exclude the impact of currency fluctuations and inflation, constitute a sharp downgrade from last year, when OPEC foresaw prices for its basket at $95.4 a barrel in 2020, and $101.6 a barrel in 2040. But with oil prices now expected to be lower than previously thought, the cartel anticipates more demand for oil in the long term.
OPEC raised its estimates for medium-term oil demand, which will rise above 97 million barrels a day by 2020. That compares with a forecast of 96.9 million barrels a day in the previous report and 92.88 million barrels a day for 2015.
The cartel cut its forecasts for supply from outside OPEC by 1 million barrels a day for 2020. That is still up by 3.5 million barrels a day, compared with 2014 levels, to 60 million barrels a day, but the group sees that number declining by 2040.
It said supply of its own OPEC crude is set to expand to 40.7 million barrels a day by 2040. That is an increase of 1 million barrels a day, compared with last year's publication and a boost of about 9 million barrels a day from 31.695 million barrels a day in November this year.
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