World oil prices are unlikely to rise from current levels before 2017, and even then their recovery will be slow as massive oil stocks feed into the market, the IEA said today.
"We must say that today's oil market conditions do not suggest that prices can recover sharply in the immediate future - unless, of course, there is a major geopolitical event," the International Energy Agency said in its medium-term report, which looks five years ahead.
"Only in 2017 will we finally see oil supply and demand aligned but the enormous stocks being accumulated will act as a dampener on the pace of recovery in oil prices when the market, having balanced, then starts to draw down those stocks," it said.
"While oil prices should start to rise gradually once the market begins rebalancing, the availability of resources that can be easily and quickly tapped will limit the scope of rallies," the report said.
The IEA acknowledged that predicting the oil market "is today a task of enormous complexity", saying experts were still grappling with the implications of a dramatic drop in the oil price from over USD 100 per barrel in July 2014 to around USD 30 today.
A year ago, analysts predicted that oil oversupply would end by late 2015, "but that view has proved very wide of the mark", it admitted.
The IEA's view is that supply will eventually be curtailed as investment cuts prompted by low prices translate into lower output. Spending on oil exploration and equipment is projected to drop by 17 per cent this year after a 24-per cent cut in 2015 "which would be the first time since 1986 that upstream investment has fallen for two consecutive years", the IEA noted.
Demand for oil, meanwhile, will continue to increase, but at a weaker pace amid financial market turmoil and clear signs that "almost any economy you care to look at could see its GDP growth prospects downgraded".
Global annual average demand growth over the next five years is expected at 1.2 million barrels per day (mb/d), down from a 1.6 mb/d increase seen in 2015 when demand received an initial boost from oil price falls.
