Oil prices in 2018-2019 are expected to remain weak due to resilient non-OPEC output, according to Global Gas Outlook released by the Gas Exporting Countries Forum (GECF).
There are four main assumptions that lay the foundations of the GECF's long-term oil price projections:
1) geopolitical tensions are not expected to be a major driver over the long-term, though they may induce significant price volatility in the short-term;
2) OPEC is expected to, once again, emerge as a swing producer in the long-term, as production potential of shale deposits in North America is expected to be limited following robust demand growth in the medium-term;
3) the cost of producing the most expensive (marginal) barrel is the defining component for oil price projections. It is expected to increase in the long-term, as new demand facilitates projects higher up the cost curve faster than technological development pushes the cost curve down;
4) car fleets will predominantly run on internal combustion engines through to 2035, after that oil demand from the transport sector is expected to flatten out.
"The GECF expects oil prices in 2018-2019 to remain weak due to resilient non-OPEC output. A coalition of selected non-OPEC countries led by Russia together with OPEC is expected to maintain supply restraint while spearheading market rebalancing around 2020," said the report.
By that time, growing demand from developing countries is expected to outpace US shale oil production and reinstate OPEC to the swing producer role, according to GECF.