Global oil market is forecast to rebalance itself at $80 per barrel in 2020, the International Energy Agency (IEA) said in its 2015 World Energy Outlook on Tuesday.
'The plunge in oil prices has set in motion the forces that will lead the market to rebalance, via higher demand and lower growth in supply,' the IEA said.
However, the agency said this process may take some time due to slow reaction of oil consumers against price changes, and added 'in the New Policies Scenario, the oil price reaches $80 per barrel in 2020 before rising further to $128 per barrel by 2040.'
Oil prices fell around 60 percent since mid-2014 due to oversupply and low global demand to reach their lowest level since 2008.
But the IEA anticipates that global demand will rise in the next decades, by almost an average of 900,000 per day every year until 2020 from the current figure of 92 million barrels a day, and by 2040 it is projected to reach 103.5 million barrels per day.
The agency forecasts India's oil demand rising by six million barrels per day by 2040, and China's demand increasing by five million barrels a day.
On the supply side, the IEA expects output from non-OPEC producers, especially the U.S., to fall after 2020, and OPEC countries will be step in to meet the global oil demand.
'OPEC’s decision to leave its production target unchanged has thrust non-OPEC producers into the front line of the market rebalancing,' the report read.
In its last two biannual meetings, OPEC refused to cut its production, in order to preserve its market share, and Saudi Arabia also pointed to non-OPEC's excess supply as one of the reasons behind plummeting prices.
- Risk of low oil prices and energy security
Low oil prices are still a risk for the industry, the IEA warns, if global economic growth remains low in the near-term, non-OPEC countries will be more resilient against low prices, and OPEC will continue its strategy to refuse trimming output and in preserving its market share.
'In the Low Oil Price Scenario, a new oil market equilibrium emerges at prices in a $50-$60 per barrel range and lasts until well into the 2020s, before prices edge higher to $85 per barrel in 2040,' the report said.
However, if oil prices remain low, this may create overdependence on OPEC producers as well.
'A Low Oil Price Scenario is good for oil consumers and importers, although the fast-growing rise in dependence on supply from the Middle East may raise concerns over oil security,' the report explained.
If low-cost oil resources are developed rapidly in the Middle East, OPEC's share in global oil production may reach above 50 percent, to levels that the cartel last had during the early 1970s, the agency noted.
Meanwhile, the IEA's Executive Director Fatih Birol stressed the importance of energy security and warned against overemphasis on oil prices.
'It would be a grave mistake to index our attention to energy security to changes in the oil price,' Birol said in a statement on Tuesday.
'Now is not the time to relax. Quite the opposite: a period of low oil prices is the moment to reinforce our capacity to deal with future energy security threats,' he added.
By Ovunc Kutlu
Anadolu Agency
ovunc.kutlu@aa.com.tr