US ex­pert pre­dicts rise in oil prices by end of 2016

China Daily (Canada) - - FRONT PAGE -

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

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