Oil and stock market prices made strong gains Monday, recovering some of the value they lost as oil prices plunged 70 percent during the past 1½ years.

Reports in the financial press said investors were reacting to a report the number of active U.S. oil rigs declined. Fewer rigs could mean lower supplies and higher prices.

Also Monday, the International Energy Agency predicted that production of U.S. oil from fracking or shale sources would fall by hundreds of thousands of barrels over the next couple of years as low oil prices discourage energy investments.

But IEA also said without new investment to create new capacity consumers could, eventually, see a sharp hike in oil prices. That is because rising demand is predicted to use up the current surplus of oil and seeks still more.

Oil market predictions

The IEA previously said oil markets could stabilize in late 2015, but now says that may not happen until 2017, and notes that oil price predictions are even more difficult than usual.

The report said U.S. oil output could hit a record high of 14.2 million barrels a day by 2021.

IEA is an organization of 29 oil importing nations and it tracks energy trends, supplies and prices.

The group’s experts say demand for oil will decline in the short term, but then recover and grow between now and 2021. IEA predicts the growth rate in the near future will be slower than in the recent past.

Falling oil prices

Oil prices have been mostly falling recently and that has sparked a sharp decline in stock market prices, which Ben Bernanke, the former head of the U.S. central bank, said is surprising.

Lower energy costs hurt energy companies, which make up a fraction of the economy. But lower costs help a majority of firms, which Bernanke said seem likely to boost, rather than hurt stock values.

In a new study published Monday, the former chairman of the U.S. Federal Reserve said the most likely explanation is that investors think falling oil prices are due to falling demand for all goods and services, and a sign of economic weakness.

Whatever the case, falling oil prices recently prompted Standard and Poor’s to cut the credit ratings of major oil producers Saudi Arabia and Russia, along with many companies in the global oil business.
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