The IMF experts believe the negotiated reduction in oil production by 1.8 mln barrels per day will help rebalance the market by the end of 2017
The International Monetary Fund (IMF) expects global oil prices to keep at around $55 per barrel in 2017-2018, according to the latest World Economic Outlook report released on Tuesday.
The average price of crude oil amounted to $42.84 per barrel in 2016, the document said. In 2017, the oil price is expected to reach $55.23 per barrel, while in 2018 it may go slightly down to $55.06 per barrel, report said.
Looking ahead, the IMF says that “despite uncertainty about technological improvements and the recent OPEC agreement, rebalancing oil supply in line with demand accompanied by stable prices, will hinge on the prospects for unconventional sources.”
The IMF expects the negotiated reduction in oil production by 1.8 mln barrels per day for six months to help rebalance the market by the end of 2017, “eliminating an excess supply currently estimated to be a little less than 1 mln barrels per day.”
“Annual oil demand growth, commonly projected at about 1.2 mln barrels per day, will be met by unconventional sources over the next few years, mainly through resources under development for deepwater and ultradeepwater oil, oil sands, and heavy and extra heavy oil,” the report said.
In the absence of shale, depletion forces and the legacy of low investment would start to kick in and push prices up significantly after a few years. “Instead, in the new normal for the oil market, shale oil production will be further stimulated by a moderate price increase. As a result, supply from shale will help somewhat tame the otherwise sharp upward swing in oil prices. Over the medium term, as prices increase further, technical improvements in unconventional oil recovery will be reactivated, which will eventually set off another price cycle,” IMF experts wrote.