The International Energy Agency (IEA) said that the decline in oil prices is likely to continue until early 2015, unless oil companies cut down on their output, according to its monthly report released on Friday, Nov.14.
Because of surplus of oil supply from North America, coupled with low demand for crude oil, oil prices have fallen 30 percent since June this year and have been at its lowest since 2010.
IEA expects that the demand for crude may return next year, with an increase of 93.6 million barrels per day, 1.2 million barrels higher than the demand this year.
"Supply/demand balances suggest that the price rout has yet to run its course. Our supply and demand forecasts indicate that barring any new supply disruption, downward price pressures could build further in the first half of 2015," the IEA said in its closely watched monthly oil market report.
Organization of Petroleum Exporting Countries (OPEC) has been working to balance the supply and demand in order to stabilize the market.
Meanwhile, the IEA reported that unless major oil producing countries including Libya experience an issue over civil conflict, supply is not expect to go down despite the price decline.
OPEC are producing 30.6 million barrels a day, higher than what was expected of them to produce (30 million barrels a day), the sixth consecutive month that the group has over-produced, according to the IEA.
If OPEC does not cut down on its production, the oil prices will likely continue to go down, that could potentially hurt higher-cost producers in other parts of the glob.e
Earlier this week, the IEA's chief economist Fatih Birol said that if oil prices remain around $80 a barrel, investment in U.S. shale projects will likely fall by 10% next year.
"Should prices continue to fall, however, medium‐ and long‐term production may fall as companies forego development of costly projects," it added.
