Oil prices will recover to $70 a barrel by 2020, oil producers’ group OPEC has said.
Prices have fallen from more than $110 a barrel in the summer of 2014 to less than $37 a barrel now due to oversupply and slowing demand.
However, OPEC said oil prices would begin to rise next year and, longer term, would rise due to higher exploration costs.
It expects the market share of OPEC producers to shrink by 2020 as rivals prove more resilient than expected.
OPEC currently accounts for about 30% of the world’s oil production, down from 50% in the 1970s.
Part of the reason for this decline is the emergence of vast quantities of shale oil produced in the US. This has also been factor in pushing down the price of oil to 11-year lows.
In its World Oil Outlook report, OPEC said it expected supply growth from US shale to slow dramatically in 2016, as producers struggled to cope with such a low prices.
OPEC’s strategy this year has been to allow prices to fall by maintaining production in the hope that, eventually, US shale producers will be forced out of business.
Another factor in low prices, OPEC said, was weaker economic growth, particularly in developing economies. It highlighted China, where the “economy seems to be maturing and growth is decelerating faster than previously expected”.
The group’s report also highlighted the “huge reductions” in spending on exploration and production by the industry as a whole due to low oil prices.
These cutbacks will ultimately see supply fall, it said, putting upward pressure on prices.
According to OPEC, another longer-term factor pushing prices up was higher exploration costs, as companies are forced to look harder for oil as traditional supply sources dwindle. Deep water drilling, for example, is considerably more expensive than drilling onshore.
Finally, OPEC said population and economic growth would see demand for energy rise by almost a half by 2040, increasing demand for oil.
OPEC was founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
These countries have since been joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975) and Angola (2007).