Oil to remain in $25-35/barrel range in near term: IHS Research

Oil prices are expected to remain low for atleast this quarter and the next one, says Dan Yergin, Chairman, IHS Cambridge Energy Research Associates. Oil will remain in range of USD 25-35 per barrel, he adds. Speaking to CNBC-TV18’s Meneka Doshi, Yergin says that oil market will be watched carefully, especially Iran, for coming weeks. Iran has said it could pump out 5, 00,000 barrels per day and if that happens, then it would add further pressure on prices, he says. The other issue weighing on the oil market is the slowdown in China, he says. The important thing to note is whether China is moving from one type of economy to another or are there any structural problem, which could slow down the economy further, he adds. Yergin says US oil production could go lower by million barrels lower in the future. Markets had expected the US's Shale Gas to go down faster, but it has turned out to be resilient and efficient, he says adding that oil companies to continue cutting budgets and jobs if prices stay at current levels. Below is the transcript of Dan Yergin’s interview with CNBC-TV18's Menaka Doshi.Q: We broke through USD 30/barrel, we broke through USD 28/barrel and now we have Iran in the mixing. It could potentially pump 500,000 barrels per day. What do you make of where prices are headed?A: That is a really critical question of what Iran can do and what Iran does do. If it puts out the type of barrels they are talking about in the higher numbers then that will just be particularly in this time of the year will just add to the downward pressure and prices. So, for the next few weeks the oil market is going to be looking very carefully in trying to calibrate what is Iran doing and what is it capable of doing but for this quarter and into next quarter we are in a period of low oil prices.Q: When you say low how low? There are some estimates that put crude oil prices at USD 10/barrel later this year. Would you agree?A: When we saw oil go to USD 10/barrel in 1999 and 1986 it was because they ran out of storage. At this point we don't see the world running out of storage. If it does then you would get those much lower prices but it looks like we are in the sort of USD 25-35 per barrel range but so much depends upon what happens with Iran and the other big question that is weighing so heavily on the oil market right now is the slowdown in China and there the question is how slow.Q: And that is an answer nobody has so far.A: No, China just came out with growth numbers which were the lowest in a quarter century. People are expecting maybe there will be a stimulus and so forth. So, the question about China is it just making a transition from one kind of economy to another or are there really structural problems there that are going to mean slower China and slower China affects the whole world because of the weight that China now has in the world economy.Q: I am interested in knowing what these lower crude oil prices have done to the shale competition and whether we are going to see some decimation of American capacity which would eventually in 6 to 8 months mean that Organization of the Petroleum Exporting Countries (OPEC) can then sort of cut back on supply maybe.A: That is one of the other questions people have been expecting US shale to go down more quickly than it has. It has turned out to be more resilient because it has been more efficient because producers are more focussed but at these price levels it is very difficult and a lot of these companies carry a lot of debt. So, we think that probably by mid-late spring we will see US oil production maybe about 1 million barrels per day lower than it had been last spring and if prices remain in this level you are not going to see the investment to maintain production.Q: Large companies are taking big write downs on some of the shale products.A: Yes, those are combination of write downs going on and you see the companies are cutting their budgets. They are cutting their expenditure, employment and sort of hunkering down for a period of lower oil prices.Q: What does this mean for the push towards renewable energy? For many countries like India that are now very focussed on pushing out bigger capacities in solar etc if crude oil prices stay at USD 20-25/barrel will renewable energy be viable?A: Renewable electricity, solar and wind don't really in many parts of the world compete with oil. They do compete with natural gas, they do compete with coal and so, if you have those low prices and many natural gas prices around the world are linked to oil prices that means it is a tougher competitive environment for renewable. A lot of them, for instance Germany made this big campaign to push renewable but that was based upon assumptions that oil prices would be very high. So, this does add to the pressure. Also at the same time this uncertainty in the world economy, the weakness in the world economy makes also just generally investment more difficult. So, this is not good news for renewables but on the other hand there is a strong policy commitment in India and many other countries to continue to push renewables.