‘Oil should rebound to $80 by 2020’

The IEA’s Word Energy Outlook, which was released this week, found the sudden plunge in price had “set in motion the forces that lead the market to rebalance, via higher demand and lower growth in supply”.

According to its “central scenario,” prices would not recover to $80 per barrel until 2020.

IEA executive director Fatih Birol said: “It would be a grave mistake to index our attention to energy security to changes in the oil price.

“Now is not the time to relax. Quite the opposite: a period of low oil prices is the moment to reinforce our capacity to deal with future energy security threats.”

The prediction came as industry body Oil and Gas UK reported a “glimmer of optimism” among companies.

Its quarterly business sentiment index, which reflects confidence, activity levels, revenue, investment and jobs in the industry rose by two percentage points.

However, at minus 27 on a scale of minus 50 to plus 50, the market remained deeply depressed.

Oonagh Werngren, Oil & Gas UK’s operations director, said: “The slight rise in optimism is counter-balanced by a large number of companies expressing concern about future activity levels, with 55 per cent reporting lower activity than the second quarter of 2015.

“Job losses continue to be a matter of concern to the majority of respondents, with just over 60 per cent indicating that headcount has already been or will be reduced.”

Meanwhile, the IEA also examined what a “lower for longer” climate would mean for the sector.

In a Low Oil Price Scenario, the report said: “new oil market equilibrium emerges at prices in a $50-60/bbl range that last until well into the 2020s before edging higher to $85/bbl in 2040”.

The scenario also depends on a stable Middle East increasing its market share, sluggish near-term economic growth and a “resilient performance from key non-OPEc producers”.

However, Dr Birol said he didn’t expect $50 oil to last “many, many years”.

Instead, the IEA forecasts demand for oil slowly rising, adding an average of 900, 000 barrels a day per year before hitting 103.5 million barrels per day by in 2040.

It’s a steady rise from this year’s 94.5 million barrels per day.

The IEA also expects by 2040, China’s net oil imports will be nearly five times those of the United States, while India’s could “easily exceed those of the European Union”.

Energy demand is expected to grow by 33 per cent between 2013 and 2040.

The report also provided insight into renewables market’s influence on the energy mix.

Renewables contributed almost half of the world’s new power generation capacity last year, becoming the second-largest source of electricity after coal.

Renewables-based generation will reach 50 per cent in the EU by 2040, around 30 per cent in China and Japan, and above 25 per cent in the United States and India, according to the report.

“As the largest source of global greenhouse-gas emissions, the energy sector must be at the heart of global action to tackle climate change,” added Dr. Birol.

“World leaders meeting in Paris must set a clear direction for the accelerated transformation of the global energy sector. The IEA stands ready to support the implementation of an agreement reached in Paris with all of the instruments at our disposal, to track progress, promote better policies and support the technology innovation that can fulfil the world’s hopes for a safe and sustainable energy future.”