The oil and gas market may never be the same even if prices rebound, a recent mid-term market report by the International Energy Agency has said.
“The recent oil market sell?off, brought on by deep imbalances after years of record-high prices, will likely prove a milestone in the history of oil.”
“However prices eventually evolve, markets may never be the same,” it said, hinting at a potential rebound in prices against a continued slackened demand.
“It is not just oil price signals that have changed, but also the market’s responsiveness to them,” the report said. Â
Lower prices will not boost demand for oil, despite what many expected. Supply will also grow far more slowly than previously thought as producers take an axe to their spending.
However, global capacity is still forecast to expand by 5.2mn barrels per day by 2020, and the toll on production will vary by country, the report said.
“A combination of cyclical and structural factors will keep the demand response to lower prices relatively subdued, and demand in several key oil exporters will be hurt by the revenue loss,” it continued.
“This unusual response to lower prices is just one more example of how shale oil has changed the market,” said IEA executive director Maria van der Hoeven, who launched the report at the Energy Institute’s International Petroleum Week in London.
“OPEC’s move to let the market rebalance itself is a reflection of that fact. It may have effectively turned LTO into the new swing producer, but it will not drive it out of the market. LTO might in fact come out stronger.”
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