IEA predicts biggest non-Opec output fall in a quarter century

 
Jessica Morris
Follow Jessica
Energy Consumption and Recycling In Europe
Oil prices are still up about 70 per cent from multi-year lows (Source: Getty)

The International Energy Agency (IEA) expects non-Opec output to fall this year by the most in 25 years.

IEA chief, Faith Birol, added that low oil prices had cut investment by around 40 per cent over the past two years, particularly in the US, Canada, Latin America and Russia.

In its medium-term report released earlier this month, the IEA said that the oil market would gradually rebalance by 2017. Oil prices have tumbled around 60 per cent from over $110 per barrel in the middle of 2014.

Read more: Has Opec lost all credibility?

Its a sign that the Organisation of Petroleum Exporting Countries' strategy to bankrupt higher cost US shale gas producers is bearing fruit. The cartel refused to cut production in the face of plummeting oil prices to defend its market share.

"Should we really be at $43 on a WTI basis? Because the closer we get to $45 mark ..., the more you're going to throw a lifeline to US shale producers," said Harry Tchilinguirian, global head of commodity strategy at BNP Paribas.

The IEA's optimistic sentiment wasn't enough to help oil prices which slipped as Russia and major Opec producers hinted at more output despite the ballooning oil glut.

Brent crude, the global benchmark, slumped about 2.3 per cent to $44.7 per barrel. West Texas Intermediate crude, the US benchmark, also fell 2.3 per cent to $43.2.

Read more: US oil producer Goodrich files for voluntary restructuring

Russia's energy minister said the country might push oil production to historic highs. Iran reiterated its intention to boost output to 4m barrels per day. Meanwhile, Saudi Arabia and Libya also threatened to raise production.

But oil prices are still up about 70 per cent from multi-year lows hit between January and February. They crept out of the doldrums on talks of a freeze deal between Opec and non-Opec, however they failed to agree anything over the weekend.

Related articles