Americas News
Oil Prices Difficult to Predict Due to U.S Shale Sector: IEA
Neil Atkinson, head of the oil industry and markets division for the International Energy Agency (IEA), told delegates to the Singapore International Energy Week 2016 (SIEW) this week that the dynamics of the U.S. shale sector are making it extremely difficult to forecast how oil prices will react in the future.
Speaking at the SIEW launch, Atkinson explained that any sign of recovery will likely encourage marginal shale producers to stay in business or resume output, which would restrict further price growth: "This is going to be a really interesting phenomenon over the next year or so, and we're all learning about it every day."
While Atkinson doubted that certain producers would be able to stay in business due to the IEA's prediction of the Brent and West Texas Intermediate crude benchmarks to average between $35 and $40 a barrel this year, he conceded that "it's a moving target because their ability to cut costs, refinance and hedge production from 2016 to 2017 shouldn't be underestimated."
Atkinson noted that the oil industry overall, in trying to understand the shale phenomenon, has failed to foresee how rapidly it would grow; moreover, it underestimated how resilient the sector has been, even during the 12-year price lows experienced in January of this year.
He added, "The third element to this is, when recovery does come, how quickly will the U.S. be able to resume growth? This is a major, major uncertainty governing our analysis in the next few years."
Earlier at the SIEW event, Atkinson warned that with an "historic" $100 billion-plus of investments cancelled by producers due to low oil prices, and stockpiles falling from 2018 to 2021, prices will spike in the "not-too-distant" future as supply fails to meet demand,
