Oil prices likely to increase later this year

The International Energy Agency (IEA) is predicting that the low oil prices of recent months will not last much longer and will likely recover later this year.

But the recovered prices will not be near the high prices of the past three years, the agency predicted Tuesday, according to The Wall Street Journal.

A slump in demand, coupled with booming production, has caused oil’s price to fall by more than half since June. That has prompted oil producers to cut spending and the number of rigs they’re using.

The effects of those cuts should start to hit oil prices in the United States in the second half of this year, the IEA said.

“We’re looking at a contraction in the U.S.,” Antoine Halff, head of the IEA’s oil industry and markets division, told the Journal.

“We’re looking at a supply increase, which is probably 300,000 barrels a day less than would have been expected prior to the price decrease.”

The report also concluded that the United States will remain the world’s top oil producer in the short term.

The IEA said the global oil market will tighten next year and stay tight for at least the next five years.

But as prices increase, shale production in the United States is likely to recover, the IEA said.

“The price correction will cause the North American supply ‘party’ to mark a pause; it will not bring it to an end,” it said.