Four more years of cheap oil — OPEC

VIENNA — The Organisation of Petroleum Exporting Countries (OPEC) sees only a gradual improvement in the global oil crude market, with prices recovering to above $70 per barrel after four years, according to a report released Wednesday.

With the global benchmark oil price touching an 11-year low of $36.04 on Monday, the oil group which produces a third of the world's crude foresees a "gradual improvement in market conditions as growing demand and slower than previously expected non-OPEC supply growth eliminate the existing oversupply and lead to a more balanced market".

OPEC, in its annual World Oil Outlook report, bases its reference scenario on $70.70 for a barrel of crude in 2020 and $95 in 2040.

Those projections represent a sharp drop in market value compared to last year's report, which predicted a nominal price of $110 for the rest of this decade.

The oil market has been rife with drama over the past year and a half as OPEC abandoned its policy of cutting production to support prices, with the price of a barrel of crude plunging more than 60 per cent.

Led by Saudi Arabia, the group instead aimed to preserve its market shares and push out growing competition from higher-cost shale rock producers in the United States.

OPEC nations, which are highly dependent on oil for government revenues, may be in for a longer haul than they had bargained for initially.

The report sees shale oil production only starting to "plateau" at 5.6 million barrels per day by 2025 and then decline.

And low oil prices are only leading to short-term boost in demand.

"The impact of the recent oil price decline on demand is most visible in the short term. It then drops away over the medium term," noted the group.

It projected the world's total crude demand to hit 97.4 million barrels per day by the end of the decade, an increase of 500,000 barrels per day compared to its forecast from last year.

And while demand for OPEC oil is also set to increase more than previously forecast over the next five years, it will still remain below current production levels.

The group sees demand for its output reaching 30.7 million barrels per day by 2020, an increase of 1.7 million barrels compared to last year's projections. It is currently pumping 32 million barrels per day.

OPEC expects its current market share to increase by four points to 37 per cent by 2040.