OPECâ€™s unwillingness to limit its oil output could help usher in a sustained period of low prices and more pain for its membersâ€™ budgets, the International Energy Agency said Tuesday.
The comments by the Paris-based monitor of energy trends echoed criticism from within and outside the group over a Saudi-led strategy of keeping the taps open to put pressure on higher-cost rivals such as the U.S.
Members of the Organization of the Petroleum Exporting Countries including Venezuela, Iran and Algeria are being badly pinched by falling oil prices CLZ5, +0.71% and have agitated for production cutbacks to push them back up.
The approach is having an effect: U.S. production has dropped in recent months, hit hard by oil prices that have fallen to less than $50 a barrel.
But it also comes at a cost. Many large investment banks and oil companies are now predicting oil prices at around $60 a barrel in 2016 â€” far lower than needed to balance the budget in some oil-producing countries, including Saudi Arabia. They also come as some Middle Eastern national oil companies are delaying projects to save money.
On Tuesday, the IEA said â€œa lasting switch in OPEC production strategy in favor of securing a higher share of the oil market mixâ€ could, among other factors, could keep the price of benchmark Brent crude LCOZ5, +0.32% around $50 a barrel through the end of the decade. OPECâ€™s oil export revenue would be 25% lower at those prices than it would be under a more bullish scenario in which oil rebounds to $80 a barrel by 2020. The IEA said the $80 scenario was more likely.