The rout in world oil prices isn’t over according to the International Energy Agency, which today predicted oil prices would fall further in 2015.

Brent crude slipped below $80 US a barrel earlier this week and West Texas Intermediate below $75, continuing the sharp decline in oil prices begun in mid-September.

Calling it a “new chapter” in oil market history, the energy agency said weak demand, a strong U.S. dollar and booming U.S. oil production are all working against higher prices for oil.

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“While there has been some speculation that the high cost of unconventional oil production might set a new equilibrium for Brent prices in the $80 US to $90 US range, supply/demand balances suggest that the price rout has yet to run its course,” the IEA said in its monthly report.

“Our supply and demand forecasts indicate that barring any new supply disruption, downward price pressures could build further in the first half of 2015.”

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After dropping by more than $3 yesterday, Brent crude recovered on Friday and was up $1.56 a barrel to $79.05 US. Nonetheless its price has dropped 30 per cent since the beginning of the year.

WTI, the contract traded in North America, was up 58 cents to $74.79 US a barrel. It is down 26 per cent in the year to date.

Oil bounced upward on Friday on speculation that OPEC could relent and cut back on its production because of falling prices.

But the IEA was skeptical that would happen.

“Pressure on OPEC to reduce production is building, but at the time of writing there appeared to be no clear consensus on a formal supply cut ahead of its meeting in Vienna later this month,” it said in its report.

Saudi and Kuwaiti oil representatives have both said publicly the countries are reluctant to cut back.

Abundant supply

The IEA pointed to the abundant global supply of oil in its monthly report, with production in October at 94.2 million barrels per day. OPEC was pumping 2.7 million more barrels a day than last year and non-OPEC growth, mainly from U.S. shale oil, was up by 1.8 million barrels a day.

The IEA pointed to the decline in world demand for oil as China has entered a less oil‐intensive stage of development. It pointed to a pattern of growth without need for new energy supply in development nations.

“Economic development no longer spurs oil demand growth as it once did, especially in the absence of wage gains,” the report said.

There are looming risks to supply from areas such as Libya and Iraq, both involved in vicious conflicts. But U.S. oil supply has so far made up the difference, the IEA said.

Lower prices threaten new investment

The threat to U.S. supply is the falling price of oil, as new shale technologies are more expensive than the conventional production seen in OPEC countries.

The IEA warned that the oil rout may cut new investment in U.S. shale oil by around 10 per cent next year. That would not slow the current rate of production, but could constrain supply going forward.

Already companies in the Bakken oil patch are talking about pulling back on new investment.

Continental Resources Inc., a major oil producer in North Dakota’s Bakken Shale, said Wednesday that the company wouldn’t add drilling rigs next year. ConocoPhillips Co. and Pioneer Natural Resources Co. have also signalled they would keep investment lower next year.

“We’re in a battle with Saudi Arabia in regard to market share,” Pioneer CEO Scott Sheffield said earlier this week.

Canadian oilsands producers have already put some projects on hold, including Total SA’s Joslyn project and Statoil’s Corner project.