High Supply to Bring Down Oil Prices to $80 in the Coming Years

A surplus of supply caused by higher crude production from Canada, Iraq and the United States, as well as weakening demand in the U.S. are expected to pull down current oil prices in the years to come, according to energy analyst Dr. Fereidun Fesharaki.

Speaking to delegates of the 21st Middle East Petroleum & Gas Conference, Dr. Fesharaki said that the outlook on crude supply is higher than ever. He added that, between Canada, Iraq and the U.S., inventory growth is expected to exceed the growth in world demand.

He further said that, in the short term, the crude price per barrel of Brent is expected to range within $100 to $110, but by 2017-2018, the price can drop to $80 and stay at that level for several years.

Other energy experts have also predicted long term oil price declines in the event the current boom continues as planned.

If that happens, world LNG projects in quantities of $60, $70 and $80 billion in cost will have to be cancelled, adding that the cheaper price of international crude would push governments of countries that produce oil to adjust their expenses.

The demand loss in the U.S. is almost 50 percent of the growth in demand in China. The gasoline demand in the U.S. is lower by 1.9 million barrels daily in the past five years and another loss in demand of 1.7 million barrels per day is expected by 2020.

But the U.S., as the biggest consumer of oil in the world, will keep on buying higher amounts of Middle East oil, said Fesharaki.

The energy expert also said that the U.S. requires heavy crudes which come from Canada, Venezuela, the Middle East and Mexico. He said that Canada is involved in environmental and political controversies, Venezuela is selling huge crude volumes to India and China, and Mexico is experiencing output declines.