IEA foresees oil ‘price rout’ to continue ILP not a guaranteed solution to brownouts

PARIS (AFP) – Oil prices are expected to keep sliding well into 2015, held down by weak demand and increased shale production, the International Energy Agency (IEA) said Friday, as it maintained its full- year forecast for slow global consumption growth.

Global crude futures slumped on Thursday to lows not seen since September 2010, with London's Brent for delivery in December diving well below the $80 mark.

Dealers however do not expect the 12- nation OPEC cartel, which is meeting on November 27 in Vienna, to cut output and thereby help shore up prices.

Some observers believe that OPEC might be rather seeking to maintain its foothold in the US market against the flood of oil being extracted domestically from shale rock – which had in part caused the global glut.

The IEA said while there had been speculation that the high cost of shale extraction '' might set a new equilibrium for Brent prices in the $80 to $90 range, supply/demand balances suggest that the price rout has yet to run its course.''

''Our supply and demand forecasts indicate that barring any new supply disruption, downward price pressures could build further in the first half of 2015,'' it added.

Demand growth is meanwhile expected to remain at the five-year low rate of 680,000 barrels a day in 2014, reaching an estimated 92.4 million barrels a day, the IEA said.

''Relatively weak Chinese demand growth, coupled with large absolute declines in both European and OECD Asia Oceania, curb the upside momentum otherwise provided by gains in other non- OECD economies and the US,'' it said.

Accelerating global momentum is seen lifting demand growth, to reach 1.1 million barrels a day to 93.6 million barrels a day.

In New York, Ggobal crude futures plunged to fresh lows Thursday amid a swamped market as US production hit a new record and the market mulled Saudi denials of a price war.

US benchmark West Texas Intermediate (WTI) for December delivery plunged $2.97, or 3.8 percent, to $74.21, its lowest close since September 17, 2010.

Brent crude for delivery in December dived by $2.46 on the last day of the contract, to $77.92 a barrel in London. It was the first time since September 2010 that Brent had closed below $80.

News that US oil production exceeded nine million barrels per day was '' psychologically bearish for the market,'' said Andy Lipow of Lipow Oil Associates.

The United States produced 9.063 million barrels of oil per day in the week ending November 7, the Department of Energy reported Thursday.

That marked the highest production since at least January 1983 when the department began publishing the statistics.

US crude reserves at the oil hub in Cushing, Oklahoma, closely watched by traders because they serve as reference for WTI traded in New York, jumped by 1.7 million barrels last week to 22.5 million barrels.

Markets were still guessing at the path of the OPEC cartel in the face of