Oil prices are set to fall later this year despite the recent OPEC agreement to limit production, Fatih Birol, the executive director at the International Energy Agency, has told CNBC.
The oil cartel’s production cut last year gave a boost to prices as it limited supply, but Birol expects other countries – most notably the U.S. – will simply step in to fill the void and depress prices, he predicted.
“As a result of the increase in prices. We are going to see a substantial amount of oil pouring into the market from the United States,” he said at the World Economic Forum in Davos on Tuesday, giving a “couple of months” timeline for his estimate on prices.
“At the end of the day we are definitely going to see more oil coming from the United States,” he said. “We will see a bit of a zig zag and we will see a greater volatility of the prices.”
The dramatic fall in prices that began in mid-2014 was due to weak demand, a strong dollar and booming U.S. oil production, according to the International Energy Agency (IEA). However, OPEC’s reluctance to cut output – until late last year – was also been seen as a key reason behind the fall.
