US expert predicts rise in oil prices by end of 2016
Supply and demand for oil will rebalance by the end of 2016, leading to stabilization in oil prices, according to a senior United States energy expert.
The drop in oil prices began to slow during the early part of this year. With the growth in global demand, “we believe by the end of 2016, oil prices will begin to recover,” said Adam Sieminski, head of the Energy Information Administration, a principal agency of the US Federal Statistical System. EIA is part of the US Department of Energy and is responsible for collecting and analyzing energy statistics. Figures published by EIA can to a great extent influence the world’s energy market.
Over the past five years, oil prices have been a great concern to the world’s economy with its ups-and-downs. They fell dramatically again in July when people expected a continuing bounce-back after fluctuations in the first half of 2015.
The price of West Texas Intermediate crude, the benchmark for oil pricing, fell below $45 a barrel on Aug 5, the lowest in the past three months.
Sieminski said oil price behavior can be impacted by several factors, and an important one is the production of oil and natural gas in the US.
US oil and gas production has risen dramatically in the past several years, making the nation the world’s biggest producer of oil and natural gas.
But in early 2015, growth in shale oil production began to slow in the US, and even went negative after rolling upward 2 to 3 percent each month from 2012 to 2014, according to EIA statistics.
In EIA’s view, lower oil prices also slowed production in other places in the world, which will eventually lead to the rebalancing of demand and supply of world oil. The prediction of higher oil prices also depends on growth in global oil demand, said Sieminski.
China and the US, the world’s two biggest consumers of oil, are demanding more oil, though economic development is slowing slightly in the two countries, according to EIA statistics. Chinese expert Zhou Fengqi, the former director of the Energy Research Institute of the China National Development and Reform Commission, is of a different opinion.
“EIA drew an optimistic conclusion,” said Zhou, “but I can’t see that oil prices will recover as soon as next year.”
From Zhou’s point of view, the Organization of Petroleum Exporting Countries is now greatly exceeding the production capacity of Russia, Middle Asia and North America. Due to weak global economies, oil demand will stay low for another long period, he maintains.
“With oil supply exceeding demand, I suppose a bounce of oil prices will not happen in the near future. More time is needed,” Zhou said, adding that if the price really goes up, it might stimulate more production, which would again drive down the price.
However, Sieminski said oil prices can be so influenced by the market that it’s hard to make accurate predictions.
“The possibility is that oil could easily go over $100 a barrel over the next year, and it could go as low as $30 a barrel,” Sieminski said. He suggested that for a possible range of $30 to $100 a barrel, policymakers should look at all of the possibilities and prepare. The reason oil prices may go lower is mainly because of Iran’s return to the oil market. EIA predicts that Iran will produce about 700,000 barrels of crude oil in the following 18 months.
Still, the instability of some main oil-producing countries and regions such as Venezuela and the Middle East can contribute to a rise of world oil prices, Sieminski said. Yan Dongjie contributed to this story.
Adam Sieminski, head of the Energy Information Administration in the US