ISTANBUL, June 27 (Reuters) - World oil prices will drop to the low $60 range by the beginning of next year as long as the security premium in the world oil market does not rise, said Daniel Yergin, chairman of Cambridge Energy Research Associates.
”Our basic sense is that oil prices for next year will be around $60 per barrel, Yergin told Reuters on the sidelines of a conference.
“We are in a period when there is a security premium,” he said.
The effect of the conflict in Nigeria on world oil prices has been underestimated despite Nigerian oil accounting for one-third of the supply to the United States, Yergin said.
Other conflicts such as the U.S.-led war in Iraq and the ongoing square-off between the West and Iran have also added to tension on the oil market.
One of CERA’s long-term oil price scenarios sees oil prices falling $20 from present price levels as long as current conflicts are contained, Yergin said, adding, however, that a second scenario sees a security premium pushing prices up another $10.
Long-term price estimates, however, will take into account nonconventional oil products as the industry taps into broader types of oil resources.
“The one change we do see is the roles of nonconventional oil, (like) oil sand, ultra-deep water,” Yergin said, “We see a subsequent build-up of capital coming in the next 10 years.”
He said he saw the role of nonconventional oil accounting for 40 percent of the global supply stream by 2017.
Russia’s newly announced South Stream project will not affect other gas pipelines planned for the region as the amount of natural gas consumption in Europe is expected to skyrocket in coming years, Yergin said.
“Europe is going to be a big market for natural gas, so the South Stream does not preempt other natural gas contracts,” he said.
Kazakh and Turkmen gas will also find its way to European markets, he added, as Central Asia joins the Middle East, Western Africa and Russia to be one of the largest energy producers in the world.
“Turkmenistan is back in the game, and the question is where the resources are going,” he said, adding that Kazakhstan has expressed that it wants pipelines going in all directions out of the country.
Central Asia, among more traditional producers, will be focusing on growth in China and India as fast-growing Asian economic powerhouses continue to affect demand on the world energy markets.
In 2004, the consumption growth of China and India grew by 2.5 percent, Yergin said.
“The China factor still looms large and it’s making people rethink the impact of China on the world market. China is less than 10 percent of the total demand but it’s growing fast,” Yergin said.