Oil price slump ‘wake-up call’ for producers: IMF

Crude price to rise only gradually to $80 by 2020: IEA

DOHA, Nov 10, (Agencies): The head of the International Monetary Fund said Tuesday that the global slump in oil prices was a “splendid wake-up call” for energy-producing countries to restructure their economies.

Speaking at Georgetown University in major gas producer Qatar, Christine Lagarde said those countries reliant on oil and gas revenues had to change to maintain their economic position.

“I would say the current situation is a splendid wake-up call to restructure,” she said. “In the face of this new situation, triggered by the price of the oil which we see as not a short-term phenomenon but a longer-term phenomenon... measures have to be taken.”

Lagarde said those measures included finding new sources of revenue and tax, and keeping a tight control on spending.

Although not specifically mentioning any countries, she also encouraged more private sector involvement.

“How do you welcome the private sector, how do you make the environment more business friendly so that the private sector feels welcome and encouraged and takes the baton from the public sector,” she said. “So, it’s a whole series of measures that need to be considered.”

Lagarde delivered a similar message to ministers of the six Gulf Cooperation Council states — Bahrain, Kuwait, Oman, Saudi Arabia and the United Arab Emirates as well as Qatar, on Sunday.

Forecast The IMF projects that growth in the GCC states will fall from 3.2 percent this year to 2.7 percent in 2016. It forecasts that export revenues will be $275 billion (256 billion euros) lower this year than in 2014.

The price of oil has dropped by more than half since the beginning of last year.

Oil is unlikely to return to $80 a barrel before the end of 2020 despite unprecedented declines in investment, as yearly demand growth struggles to top 1 million barrels per day (bpd), the International Energy Agency said on Tuesday.

In its World Energy Outlook, the IEA said it anticipates demand growth under its central scenario will rise annually by some 900,000 bpd to 2020, gradually reaching demand of 103.5 million bpd by 2040.

The drop in crude to around $50 a barrel this year has triggered steep cutbacks in production of U.S. shale oil, one of the major contributors to the oversupply that has stripped 50 percent off the price in the last 12 months.

“Our expectation is to see prices gradually rising to $80 around 2020,” Fatih Birol, executive director of the IEA, told Reuters ahead of the release of the report.

“We estimate this year investments in oil will decline more than 20 percent. But, perhaps even more importantly, this decline will continue next year as well.”

“In the last 25 years, we have never seen two consecutive years where the investments are declining and this may well have implications for the oil market in the years to come.”