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Oil prices are likely to be mired near their lowest levels in more than four years in 2015 and investments will take a backseat, underlining a gloomy outlook for the industry.

A global supply glut and demand concerns have battered oil prices, wiping out a quarter of their value over four months and putting some high-cost energy projects at risk.

Delegates attending one of Asia's biggest energy conferences in Singapore this week said they expected a supply-demand mismatch to get worse and were not hopeful major producers, including the Organization of the Petroleum Exporting Countries (OPEC), would do much to reduce output.

"We should not take for granted that OPEC will go back to its old role as a swing producer," said Maria van der Hoeven, executive director of the International Energy Agency (IEA).

"But what we see as likely is that some higher cost production in OPEC countries and non-OPEC countries will be tested in the event of further price declines."

Some 24 out of 37 traders, analysts and senior executives that Reuters spoke to on the sidelines of the conference said they expected the European benchmark to average between $80 to $90 per barrel in 2015.

More than 10,000 delegates from over 60 countries attended the Singapore International Energy Week.

Brent, which hit a four-year low of $82.60 earlier this month, has averaged around $105 so far in 2014. A Reuters monthly poll said the European benchmark could average $93.70 in 2015, with forecasts ranging between $80-$105.

SUPPLY SPIKE

Most contributors to the informal Reuters survey at the conference said they expected U.S. shale output to grow next year by 1 million barrels per day (bpd).

West Texas Intermediate crude prices need to drop around 13 percent from current levels to $70 a barrel for producers in the country to cut back production, they said.

The United States is expected to emerge as the world's top oil producer in 2015, according to the IEA, as advancements in shale gas fracking technology reverse decades of oil production decline.

OPEC, which pumps a third of the world's oil, is also likely to maintain its output quotas at its November meeting, intensifying the battle for market share, analysts and traders said.

"OPEC is unlikely to cut output because they want lower crude oil prices to keep their market share and to encourage consumption and also to discourage marginal producers," said a veteran oil trader.

If the group does agree to a cut output, any reduction would be minimal at 500,000 bpd from its overall output of over 30 million bpd, said the participants.

SLUGGISH DEMAND

The supply impact is exacerbated by sluggish demand owing to weak global economic growth, the industry sources said.

Global oil demand will grow 500,000-1 million bpd in 2015, they projected, lagging the IEA's forecast of 1.1 million bpd.

The veteran oil trader said Europe's economic growth was stagnant and Asia would expand but at a slower pace.

Around half the survey participants see China's economic growth slowing to 6-7 percent next year. China's gross domestic product rose 7.3 percent in the September quarter, the slowest pace since the global financial crisis.

"We expect Asia to remain the key contributor to (oil demand) growth for the next 5 years to 2020 but at a lower rate than we have seen in the previous periods," said Toril Bosoni, a senior oil market analyst at IEA.

The weak outlook has already prompted Goldman Sachs, known for its bold oil price calls, to slash its forecasts by $15 for the first quarter of 2015 to $85 for Brent and $75 for U.S. crude.

The oil price slump will put many high-cost frontier and deepwater exploration projects in Asia at risk, delegates said.

"People are now very, very cautious about a lot of marginal projects," said Marat Zapparov, director of infrastructure at Clifford Capital Private Limited, Singapore.
Source: Reuters

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