Don't write oil's 'obituary', IEA says in long-term demand forecast

IGU Logo

Oil will continue growing as a source of energy for over two decades, with the U.S. set to become the undisputed leader in crude and gas production, the International Energy Agency said Tuesday.

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, CNBC reported. However, this is expected to cut only 2.5 million barrels per day, or about 2%, off global oil demand by that time.

In its drilling productivity report for this month, the U.S. Energy Information Administration said it expected oil production from the seven main inland shale basins to increase about 1.3 percent in December. The figure was even lower based on secondary sources rather than what the government reports, at 1.863 million bpd in October, according to Opec.

To be sure, the IEA expects Canadian oil production to rise - to 6.2 million barrels per day by 2040 from 4.5 million bpd in 2016, 100,000 bpd more than the IEA's last report.

Unless OPEC agrees to cut more production, output from non-member states will leave the market in surplus and limit the rally in oil prices, the IEA said.

The effort, which started in January, is credited with pulling the price of oil back from the sub-$30 per barrel range last year to two-year highs in recent sessions.

The largest disruptive force to supply will be shale production in the U.S. - the IEA estimates USA crude oil will reach peak output in the 2020s of around 17m bpd.

"Next year's demand growth will struggle to match this", the IEA said.

IEA said it had cut its longer-term oil price projections from previous year, partly because of the falling cost of both renewable and conventional sources of energy, the worldwide push to tackle climate change and improve air quality and the boom in USA shale oil and gas output.

"Prices ... are starting to look like a pause or pullback is needed", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Echoing the forecast by IEA, the Organisation of the Petroleum Exporting Countries said after long years of punishingly low oil prices, there is "increasing evidence" that the oil market is moving closer to reaching a healthy balance between supply and demand.

"None of its core scenarios for the future of energy provide a reasonable chance that the world will avoid climate catastrophe", said Adam Scott, senior advisor at Oil Change International.

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.

Related News:



Most liked

EU Ministers Sign Landmark Defense Agreement
Britain, which is leaving the European Union in 2019, and Denmark with a defense opt-out were among those not taking part. EU foreign policy chief Federica Mogherini described the signing of PESCO as a "historic moment in European defense".

49ers Marquise Goodwin loses son hours before Sunday's game
Goodwin has shown tremendous strength in his performance as a player, but also as a father and a husband, on Sunday. On Instagram , Goodwin wrote that doctors had to deliver their son prematurely around 4 a.m.

Two Stabbed At Mall Of America
The second victim, who was believed to be a family member or friend of the other victim, was stabbed after intervening. Both victims were taken to a nearby hospital with what police describe as non-life threatening injuries.

Earthquake Hits Iraq And Iran, At Least Six Dead
The temblor, centered about 350 kilometers (217 miles) north of Baghdad, was felt throughout Iraq, USGS said. Tremors could be felt as far away as in the UAE after a 7.3 magnitude natural disaster struck Northern Iraq.