Baku, Azerbaijan, Oct. 20
By Aygun Badalova - Trend:
Higher demand and slower non-OPEC production growth will be key reasons for oil prcies' rise over the next few years, according to the analysts of the British economic research and consulting company Capital Economics.
"However, the return of exports from Iran and strong growth in oil production from other OPEC members, especially Iraq, should mean that oil prices rise only gradually.
Iran currently produces more than 2.8 million barrels of crude oil per day. The country is to resume oil production to pre-sanctions level in mid-2016 at 3.8 million barrels per day.
Iran is planning to increase its oil export from one million barrels a day to 1.5 million in the course of seven days once the sanctions are lifted. After that, the country will increase its export to two million barrels per day during the course of a six-month program.
Oil prices hit their lowest point since the 2008 financial crisis in late August, before recovering a little, analysts said in their report. However, compared to the slump in the second half of last year, the bigger picture is of relative stability.
The supply response to the previous sharp falls in prices should also provide increasing support, according to the analysts.
"Drilling activity in the US shale sector has already fallen sharply and this source is clearly not going to be putting as much downward pressure on prices as before," the report said.
"Indeed, the IEA (International Energy Agency) is now projecting that total non-OPEC supply will fall by around 0.5 million barrels per day next year. This is not a large decline in percentage terms (around 1 percent of the non-OPEC figure) and might be quickly reversed if prices do recover, but it would contrast with the strong upward trend in production in recent years," the report said.
Non-OPEC accounted for just under 40 percent of the 1.8 million barrels per day annual increase in total oil output in September, according to the IEA's Oil Market report for October.
"Lower oil prices and steep spending curbs are expected to cut non-OPEC output by nearly 0.5 million barrels per day in 2016," the agency said.
Capital Economics' analysts forecast Brent price to average $55 a barrel in the fourth quarter of 2016, while WTI price to average $50 a barrel. By end of 2016 Brent price, according to the analysts' expectations, will reach $60 a barrel, WTI prices - $55 a barrel.