The International Energy Agency (IEA) says global oil supply will struggle to keep up with demand beyond 2020, unless there is a surge in new capital projects approved during 2017.
In its latest five-year oil market forecast, the IEA said that OPEC’s experiment to pursue a market share strategy has ended and the industry is coming to terms with the most comprehensive output reduction agreement seen since 2008.
The IEA expects oil supply to grow predominantly in the USA, Canada, and Brazil. The USA will account for the bulk of new supplies by 2022, with production rising by 1.4 to 3 mn bpd by 2022 – as long as oil prices remain around USD60 per barrel or rise to USD80; a decline in global oil prices to USD50 per barrel would reduce US oil production from the early 2020s.
Within OPEC, the major low-cost Middle Eastern producers – Iraq, Iran, and the UAE – should account for the bulk of new supplies, while oil production should decline in Nigeria, Algeria and Venezuela. Oil production in Russia is expected to remain stable by 2022.
Oil demand, on the other side, should pass the 100 mn bpd threshold in 2019 and reach 104 mn bpd by 2022. 70 percent of new demand will come from Asian economies.
“We are witnessing the start of a second wave of US supply growth, and its size will depend on where prices go,” said 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,” Birol added.
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