The International Monetary Fund (IMF) warns that the sharp collapse in the oil price will put more burdens on the global economy. The financial strains on exporters and the deep investment cutbacks in the industry are more than offsetting the expected gains from cheap oil enjoyed by key importers like Japan and the United States, the IMF said.
Low oil prices, while hurting both oil producers and oil companies, can often be positive for consumers and non-oil corporates and therefore for global growth. The oil price which now goes around $30 per barrel hit 12-year lows.
The Paris-based International Energy Agency (IEA) also warned that prices had not yet bottomed out. “Can it go any lower?” the IEA asked in its monthly oil market report. “Unless something changes, the oil market could drown in over-supply. So the answer to our question is yes. It could go lower.” Growth in world demand for oil is also expected to ease off, it said.
Analysts believe that it is difficult to regain prices after the revolution of U.S. shale oil, and the persistent glut will keep crude prices low until the year 2030. On the contrary, some oil executives from OPEC member countries are assuming the oil price will rise gradually to reach $80/b in 2020.
Most of OPEC member countries now became unable to balance their budgets at current prices. The price of crude has tumbled more than 70% since the summer of 2014 as OPEC followed Saudi Arabia’s strategy of defending its share of the global market against competitors like U.S. shale oil. While both OPEC and the International Energy Agency expect growth in global supply to slow as low prices bite.
According to OPEC estimates, production from nations outside OPEC will be 58.2 Million b/d in 2017, which is about 1 million b/d lower than previously forecast
OPEC expects little stimulus to global demand in the medium term mainly from developing nations as a result of cheaper oil, with daily consumption growing by about 1 million barrels a year to 97.4 million in 2020.