(EnergyAsia, January 28 2015, Wednesday) — After seven months of largely uninterrupted decline, crude prices appear to have settled into a trading range between US$45 and US$49 per barrel in recent weeks.

Analysts are divided over whether this represents a lull before the next leg of the market’s sustained plunge or the medium-term floor for its eventual recovery. Some are calling for prices to slide to the mid-$20s while the International Energy Agency (IEA) believes a recovery will take hold later in 2015. OPEC’s secretary-general, Abdullah al-Badri, was more than hopeful when he told Bloomberg that crude prices could spike all the way to US$200 a barrel if the industry failed to make new investments amid the present carnage.

In its January report, the IEA said has detected “signs” that the tide is turning in favour a price recovery. As a result of weak prices, the agency has reduced its forecast for US production growth in 2015 by 75,000 b/d to 850,000 b/d and for Canadian output growth by 95,000 b/d to 220,000 b/d.

UK-based consultant DW said oil prices are being held down by oversupply, but suggested it may not be for too long.

“Production from wells declines naturally at some 9% p.a., and even with costly intervention at perhaps 5% p.a. With global demand at some 92 million b/d, this suggests a requirement to replace in excess of 4.5 million b/d of production in 2015 and more in 2016, etc., but where will the new oil come from?” it asked.

Citing the IEA, it said US oil production may grow by 500,000 b/d in 2015 but could start to peak as early as 2016.

“Investment in production is already being hard hit. Around 400,000 low output stripper wells each pump less than 10 b/d, but in total produce three-quarters of a million b/d and are prime candidates,” it said. At the other end of the scale, BHP Billiton has said it would cut back on its planned US$4 billion spending on its US shale assets.

Offsetting these losses, DW said projects underway worldwide will add production to complement OPEC’s near 2.5 million b/d of spare capacity.

Making the case for a possible price recovery as early as late 2015, DW said the market may see a balanced state soon, and then encounter insufficient supply and rising prices.

“Furthermore, we must not forget there is always potential for supply disruption, OPEC has at times lost some 2 million b/d, non-OPEC producers near 1.2 million b/d,” it said.

“Unless we keep adding production, surplus capacity will be quickly eroded. The next oil price surge is already being set up.”

Canada’s RBC bank also read the IEA projections as being positive for crude prices on account of the agency reducing its non-OPEC supply forecast by 350,000 b/d to 57.5 million b/d for 2015.