The drastic slide on Brent crude was one of the stories of 2014 and continued to run deep into 2015, but a report from the International Energy Agency (IEA) suggests oil prices may yet fall further.

The 40% drop from $115 per barrel in June (2014) to less than $70 per barrel in December, and declining further to $47 in January (2015), worried policy-makers and producers the world over.

While oil prices had stabilised – and even risen in recent months – as some of the volatility in the market eased, the same could not be said for production.

The IEA Oil Market Report for July notes that global oil supply surged by 550,000 barrels per day (550 kb/d) in June, on higher output from both OPEC and non-OPEC producers. In fact, at 96.6 million barrels per day (mb/d), world oil production was 3.1 mb/d higher than a year earlier.

World oil demand growth, however, appears to have peaked in first quarter (2015) at 1.8 mb/d and will continue to ease throughout the rest of 2015 and into 2016 as temporary support fades, the IEA report states.

All of which leaves the global oil market in a scenario of significant over-supply and unable to absorb the strong volumes that continue to be published – and potentially heading for even lower prices through to 2016.

Non-OPEC supply growth is expected to grind to a halt in 2016, as lower oil prices and spending cuts take a toll, the IEA says, while there will likely be effects throughout industry and economies the world over.



gasworld understands that there will be a short-term gain in demand for industrial gases as a result of lower oil prices, as materials output and demand takes off. In the medium term, there will likely be a lull as major petrochemicals, refining and metals projects are either placed on hold or cancelled altogether.

Long-term projections still point to an upward trend in crude oil prices. However, if the current dynamics continue, greater investment downstream is expected as countries and corporations alike drill down into the added value of each barrel – in turn, boosting industrial gas demand.

The prospects for the LNG business could be less favourable, however. Depressed oil prices have already placed eleventh hour questions over various LNG projects as the economics surrounding oil play out.

With the decrease in value of oil, LNG pricing has been pushed down; the two are intrinsically linked. With a glut of LNG terminals either just coming on-stream or about to this year there is – like oil – an over-supply in the market.

This comes at a time when many scheduled construction projects of LNG terminals around the world are facing unplanned setbacks as financers try to balance the books and deduce if their existence will raise some profit, if any at all, upon completion.