In the latest sign that the seven-month selloff in crude-oil prices may be nearing a bottom, an energy watchdog said that a recovery seems “inevitable” and the glut that has driven down prices by more than 50% since June could start to ease as soon as the second half.

A wave of spending cuts by oil producers and a sharp decline in the number of rigs drilling for crude in the U.S. likely will slow the nation’s oil-output growth, spurring a rebound in prices, the International Energy Agency said in a report released Tuesday U.K. time. The benchmark U.S. oil price rose 2.3% to $52.86 a barrel on Monday and is up 19% from a nearly six-year low hit last month.

The IEA, which coordinates energy policy among industrialized countries, is adding its voice to the chorus of experts who say that the global glut is abating.

The IEA said its report, which presents a view of the oil markets five years out, aims to shed light on how a recovery will proceed, adding that a “price rebound…seems inevitable.”

Stabilization in oil prices would spell relief across financial markets, which have been rocked by concerns that oil’s plunge signaled softness in global growth. The plunge has pummeled share prices of oil producers and currencies of oil-dependent economies.

If sustained, rising oil prices would curb the boon U.S. consumers have reaped from lower gasoline prices. A spike in crude prices could also create headwinds for a global economy already struggling with fragile growth in some corners. The average price of regular gasoline at the pump was $2.18 a gallon on Monday, according to motor club AAA. While that is up from the nearly six-year low of $2.03 a gallon reached on Jan. 26, it is below the $3.28 seen this time last year.

“You do have evidence that future production will be curtailed,” said Keith Hembre, chief economist and portfolio manager at Nuveen Asset Management LLC in Minneapolis who oversees $800 million across four funds.

Oil companies like Royal Dutch Shell PLC, Chevron Corp., BP PLC and Norway’s Statoil AS A have slashed their investment programs by billions of dollars, moves that analysts say eventually will damp production growth.

The forecast slowdown in U.S. oil output appears to be coming at the benefit of the Organization of the Petroleum Exporting Countries, analysts said. In a separate report, released Monday, OPEC said demand for the group’s oil would rise in 2015, reversing an earlier estimate that predicted a decline.

The conclusions drawn from the IEA and the OPEC reports indicate that OPEC’s strategy to protect market share by keeping the spigots open is showing early signs of success. Led by Saudi Arabia, OPEC in November surprised markets when it maintained its production levels, a move that some observers said was aimed at weakening U.S. shale-oil producers.

The earnings of big oil companies have been battered by the decline in oil prices, but many investors expect these firms to persevere through the slump. The speed and size of the decline, though, have raised questions about how smaller, independent oil producers will survive in an environment of low oil prices.

Oil from newly tapped U.S. shale fields is more expensive to produce than crude in much of the rest of the world, so output is harder to sustain when prices are low.

An OPEC official from the Persian Gulf said the cartel’s report reflects views held by Saudi Arabia’s oil ministry.

“There are strong indications that U.S. shale producers are taking a hit, and by the second half of this year a lot of marginal barrels will disappear from the market and demand will rise for OPEC members,” he said.

OPEC’s new forecast doesn’t necessarily mean oil prices will bounce back to their previous levels. Its own production remains nearly one million barrels a day above the amount markets need.

The IEA concurs, saying that any rebound in oil prices will be capped. In its analysis, the coming price increases will likely be tempered by a rebound in U.S. oil output. From 2017, the organization expects U.S. shale-oil output to surge again, stimulated by a recovery in prices. It forecasts supply will rise to about 5.2 million barrels a day in 2020, compared with 3.6 million barrels a day in 2014.

“The price correction will cause the North American supply ‘party’ to mark a pause; it will not bring it to an end,” the IEA said.

Although U.S. shale output will remain a major source of new oil supply at the end of the decade, demand for OPEC’s oil will also increase as other sources of non-OPEC supply take longer to recover from lower prices.

The IEA forecasts demand for OPEC’s oil will start rising in 2016 and reach 32.1 million barrels a day by 2020, 2.7 million barrels a day above demand in 2014.

OPEC also sees American motorists as an ally. The cartel increased its forecast for North American oil consumption by 15,000 barrels a day, a shift that translates into an increase of 20,000 barrels a day in forecast demand growth world-wide.

“Gasoline, in particular, remains a key driver behind the growth in U.S. oil demand, largely a result of lower oil prices,” OPEC said. Overall, oil consumption is expected to increase by 1.17 million barrels a day to 92.32 million barrels a day.

Corrections & Amplifications

An earlier version of this article said OPEC increased its forecast for North American consumption by 150,000 barrels a day. It increased its forecast by 15,000 barrels a day
Source:http://www.wsj.com/articles/demand-for-opec-crude-will-rise-this-year-says-group-1423482563


The Brent Crude Closed on Friday 27th February, 2015 at an all year High of $62.58/Barrel.

This is true.

However, the diversification of our economy started by GEJ must continue with full blast.

To hypothetically think that if Buhari wins (an impossibility) he would have claimed to have succeeded in stabilizing oil prices is laughable.

Its a win win for Nigeria
The current spending cuts by GEJ must be sustained
The diversification of the economy must proceed unabated
And confab report must be implemented

GEJ Unstoppable! !!!!!!!

I no tell u...

If theso called inevitable rebound in oil is not properly managed and well appropriated for Nigerians will continue to leave averagely below the poverty line.

My personal decision has been to take destiny into my own hands and protect the future of millions of unborn Nigerian patriots and citizens by voting in the wise choice of candidate and party that i can solely trust to alleviate majority of the ongoing problems the country is going through.

Without no hate and contempt,my vote remains for Buhari,the only candidate i can trust with the proper use of my hard-earned tax payers money and not someone full of greedy and selfish appetite !

Nigerians dont do the mistake of not giving the Nigeria of our dreams the chance to be.i believe in a greater Nigeria because i have truthfully seen and experienced a fairer Nigerian society ! Vote wisely without sectional interest,vote for the future of a greater Nigeria.Vote Change,Vote Buhari !

OPEC secretary General predicted that Oil price could hit $200.
The Nigerian Government would have learnt their lessons:
-Diversify the Economy
-Build an Import based Economy
-Develop the local market to have substitutes for imported goods
-Revamp existing Refineries and create the enabling Climate for Private partnership in building new Refineries.
-Cut down on Cost of Governance.

Never again will Nigerians suffer from Crash in Oil Price!

Teamneveragain!

If CBN have officially devalued the naira, they should re-value it Now !!!

I know that's wishful thinking...

stevecantrell:
If CBN have officially devalued the naira, they should re-value it Now !!!

I know that's wishful thinking...

It's not in the common man's interest that the oil price should rebound. Our naira has been seriously devalued. A rebound in oil prices will lead to significantly high prices at the pumps and no salary increases. The naira won't go back to early 2014 levels and government is committed to removing fuel subsidy.

Oh No!....hw will Buhari now stabilize INTERNATIONAL oil price with dis new development.

Abeg oil price go down, Buhari is on his way to work his abokì magic.