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Global agency sees oil price recovery but no return to highs

Published:Wednesday | February 11, 2015 | 12:00 AM

The price of oil is poised for a "relatively swift" recovery following the recent collapse to under US$50 a barrel, but it will not come close to returning to the highs of past years, the International Energy Agency (IEA) predicted Tuesday.

In a report, the Paris-based organisation of 29 major oil-importing nations said the rebound in recent days of the oil price "will be comparatively limited in scope, with prices stabilising at levels higher than recent lows but substantially below the highs of the last three years".

The US benchmark oil contract fell from nearly US$110 a barrel last summer to under US$45 this year before a recovery to around US$53 in recent days.

The IEA says the current price recovery is unlike those of the past, because of the sharp increase in production by non-OPEC countries, especially in the United States, as well as slowing demand in China and slimmed down fuel intensiveness in the developed world.

The agency also said that unlike past cycles, the low oil price is not expected to greatly boost economic output, because low demand was itself part of the reason for the market drop.

"The fact that lacklustre demand was part of the reason for the recent price collapse suggests that the sell-off will only go so far in boosting economic growth and lifting oil demand," the agency said.

The IEA now forecasts global oil demand to reach 93.3 million barrels a day in 2015, well below the 94.2 million barrels forecast in its last report.

"Unlike earlier price drops, this one is both supply- and demand-driven," the IEA said.

- AP