Lower Supply Could Lead To Higher Oil Prices
International Business Times
Published Oct 06, 2015 08:35AM ET
Updated Oct 06, 2015 09:16AM ET
Lower Supply Could Lead To Higher Oil Prices
By Lydia Tomkiw -
With global oil investments expected to be down by approximately $130 billion this year, the secretary-general of OPEC said Tuesday that this could mean higher prices in the near term. Many members of OPEC have faced deficits with lower supply levels, potentially increasing prices, the Wall Street Journal reported.
There will be "less supply in the very near future,” said Abdalla Salem el-Badri, OPEC’s secretary general. “Less supply means high prices.”
Many OPEC members have had deficits this year trying to compete with the United States' share of the oil market. Investment in petroleum-related projects was expected to be down by over 22 percent in 2015, el-Badri said. Despite this, oil consumption at lower prices has risen by 1.3 million barrels a day, signaling “some light at the end of the tunnel,” according to el-Badri.
The chief executive of Royal Dutch Shell (LONDON:RDSa), Ben van Beurden, said Tuesday that he saw the beginnings of the oil market’s recovery.
“I see the first mixed signs for recovery of oil prices,” van Beurden said at an oil industry conference, according to Reuters. "But with U.S. shale oil being more resilient than we originally thought and a lot of oil still in stock, it will take some more time to rebalance demand and supply.”
Global oil prices have taken a major hit this year falling from a high of more than $115 a barrel in June 2014 to below $50 a barrel this year. Experts point to the oversupply of oil as one of the major factors.
In the long-term, there was a risk that lower levels of oil production in countries outside of OPEC and the U.S. could result in an increase in oil prices, van Beurden said.
"This could cause prices to spike upward, starting a new cycle of strong production growth in U.S. shale oil and subsequent volatility," he said.
El-Badri predicted an oil market recovery in the next 18-24 months.
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Written By: International Business Times
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