IEA chief sees no peak in oil demand, but slowed investment will reduce supply
Global oil demand could outpace supply after 2020, according to a release from the International Energy Agency today. The IEA’s five-year oil market forecast outlines expected supply and demand trends in the global oil market.
Supply will grow for next 3 years, then slow way down due to investment slump 2015-17
The IEA predicts that supply will grow comfortably for the next three years, but slow considerably after that. This growth decrease is due to the significant investment slump in 2015 and 2016. The decreased investment has canceled many major projects, decreasing future production. While U.S. investment is picking up, early indications of global 2017 spending are not encouraging, according to the IEA.
The United States will see the most supply growth in the next five years, fueled by U.S. shale. Assuming prices remain around $60/bbl, the IEA expects U.S. light tight oil production to grow by 1.4 MMBPD by 2022.
The short-cycle nature of shale development means the United States responds more rapidly to prices than other producers. If prices rise to $80/bbl U.S. shale output could grow to 3 MMBPD in the next five years. If prices stay at $50/bbl, on the other hand, shale production could decline in the early 2020’s. Related: The Bakken Gets A Second Wind
OPEC’s low-cost producers will grow output, high-cost producers’ output will shrink
OPEC production will be mixed, with low-cost Middle Eastern producers like Iran, Iraq and the UAE seeing production growth in the next five years. Nigeria, Algeria, Venezuela and other high-cost producers will see production decline.
Demand up sharply over a 5 year period: Asian markets account for 70 percent of demand growth
Oil demand will increase strongly in the next five years from current consumption of 97 MMBPD to 104 MMBPD in 2022. Developing countries, those in Asia in particular, will fuel this growth. According to the IEA, Asian markets will account for about 70 percent of all demand increase.
“We are witnessing the start of a second wave of U.S. supply growth, and its size will depend on where prices go,” said Dr. Fatih Birol, the IEA’s Executive Director. “But this is no time for complacency. We don’t see a peak in oil demand any time soon. And unless investments globally rebound sharply, a new period of price volatility looms on the horizon.”
By Oil and Gas 360
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