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OPEC oil price could plunge to $15/bbl in 1997

March 17, 1997

The price for the marker basket of crudes that the Organization of Petroleum Exporting Countries tracks could fall to $15/bbl this year. So warns London's Centre for Global Energy Studies (CGES), in a new study (OGJ, Feb. 24, 1997, p. 34). CGES last month completed a study of oil supply, demand, and prices to 2010, and concludes that non-OPEC output holds the key to future oil prices: "When it stops growing, we find that real oil prices start to rise."

The price for the marker basket of crudes that the Organization of Petroleum Exporting Countries tracks could fall to $15/bbl this year.

So warns London's Centre for Global Energy Studies (CGES), in a new study (OGJ, Feb. 24, 1997, p. 34).

CGES last month completed a study of oil supply, demand, and prices to 2010, and concludes that non-OPEC output holds the key to future oil prices: "When it stops growing, we find that real oil prices start to rise."

CGES' base case scenario is a weakening of the oil price in nominal terms between now and 2001. Despite global oil demand rising by 6.9 million b/d, CGES foresees a money-of-the-day oil price of around $15/bbl until 2002.

"There is a simple reason for this," said CGES. "The world's potential supplies of oil are expected to increase by more than the 6.9 million b/d rise in global oil demand.

"Non-OPEC output is expected to increase by 3.4 million b/d between 1996 and 2001, taking almost half the increase in world oil demand during that period, while Iraq should be producing at capacity from 1999 onwards, bringing another 2.5 million b/d into play within 2 years."

Only after non-OPEC production begins to decline around 2005, after 5 years or so at a plateau, will oil prices begin once again to rise slowly, CGES predicts.