IEA says hopes of higher, stable oil prices could be dashed quickly

Ivan Schwartz
November 15, 2017

Indeed, the IEA also suggests that demand for oil will remain supported by lower prices, going forward.

The IEA states that the shale oil revolution in the USA continues thanks to the "remarkable ability of producers to unlock new resources in a cost-effective way".

"Oil is already facing stiff competition from ever-cheaper and more environmentally friendly energy sources as traditional fossil fuel users switch to cleaner, low-carbon alternatives", IEA said in its World Energy Outlook 2018.

Under its "New Policies Scenario", based on existing legislation and announced policy intentions relative to emissions and climate change, the oil price should continue to rise towards $83 a barrel by the mid-2020s.

The IEA said oil production will be driven by continued growth in energy-hungry industries.

With big gains forecast in its output of shale oil, the United States is expected to become a net oil exporter by the mid-2020s, the IEA said, adding that the USA will account for 80 per cent of the increase in the global oil supply to 2025, which will maintain near-term downward pressure on prices. This latest move comes as investors expect figures to show USA oil production has risen.

The price of oil has risen over 30 percent since June to a two-year high of around $57 a barrel in NY trading amid evidence of stronger economic growth around the world.

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For all of 2017, total demand is now forecast at 97.7 million barrels a day, up by 1.5 million barrels a day (1.6%) compared to 2016.

The Paris-based IEA revised demand growth down by 100,000 barrels per day (bpd) for both 2017 and 2018, for an increase of around 1.5m bpd this year, to 97.7m bpd, and 1.3m next, to 98.9m bpd, which could push the market back into a surplus in the first half of next year.

It argues that fuel efficiency and rising electrification will bring a peak in oil used for passenger vehicles, even with a doubling of the auto fleet to 2 billion vehicles by 2040.

Some analysts even predict that with oil demand declining as EVs set to replace conventional fuel vehicles, oil price could plunge to as low as $10 a barrel over the next six to eight years.

Also weighing on the oil price, is the increasing prospect of a slower pace of economic growth in China.

Overall global energy needs are seen rising more slowly than in the past, but are still projected to expand by 30 per cent between today and 2040.

Other reports by GizPress

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