Monday, April 23, 2018

Global oil supply might not be enough by 2020, international agency says


Monday, March 6, 2017
by LYNDON FINNEY/The Trucker Staff

Oil demand will rise in the next five years, passing the symbolic 100 million barrels a day (mb/d) threshold in 2019 and reaching about 104 mb/d by 2022, the International Energy Agency has forecast. (©2017 FOTOSEARCH)
Oil demand will rise in the next five years, passing the symbolic 100 million barrels a day (mb/d) threshold in 2019 and reaching about 104 mb/d by 2022, the International Energy Agency has forecast. (©2017 FOTOSEARCH)

HOUSTON — Global oil supply could struggle to keep pace with demand after 2020, risking a sharp increase in prices, unless new projects are approved soon, according to the latest five-year oil market forecast from the International Energy Agency (IEA).

The global picture appears comfortable for the next three years, but supply growth slows considerably after that, according to Oil 2017, the IEA’s market analysis and forecast report previously known as the Medium-Term Oil Market Report.

The demand and supply trends point to a tight global oil market, with spare production capacity in 2022 falling to a 14-year low.

In the next few years, oil supply is growing in the United States, Canada, Brazil and elsewhere but this growth could stall by 2020 if the record two-year investment slump of 2015 and 2016 is not reversed, the IEA said, adding that while investments in the U.S. shale play are picking up strongly, early indications of global spending for 2017 are not encouraging.

Oil demand will rise in the next five years, passing the symbolic 100 million barrels a day (mb/d) threshold in 2019 and reaching about 104 mb/d by 2022, the IEA forecast.

Developing countries account for all of the growth and Asia dominates, with about seven out of every 10 extra barrels consumed globally.

India’s oil demand growth will outpace China by then.

While electric vehicles are an important factor for oil demand, the IEA estimates they will displace only limited amounts of transportation fuel by 2022.

“We are witnessing the start of a second wave of US 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.”

The largest contribution to new supplies will come from the United States, the IEA predicted.

The organization expects U.S. light tight crude oil (LTO) production to make a strong comeback and grow by 1.4 mb/d by 2022 if prices remain around USD $60 a barrel.

Benchmark crude was trading slightly above $53 a barrel Monday.

Expectations for US LTO are higher than last year’s forecast thanks to impressive productivity gains, the IEA said.

The United States responds more rapidly to price signals than other producers, Birol said.

“If prices climb to USD $80/bbl, U.S. LTO production could grow by 3 mb/d in five years. Alternatively, if prices are at USD 50/bbl, it could decline from the early 2020s,” he said.

The IAE said that within OPEC, the bulk of new supplies will come from major low-cost Middle Eastern producers, namely Iraq, Iran, and the United Arab Emirates. Others like Nigeria, Algeria and Venezuela will decline. For its part, production from Russia is forecast to remain stable over the next five years.

The report also highlights changes in international oil-trade flows and investments in storage infrastructure.

Asia will need to look beyond the Middle East to meet its growing import requirements, the report said, adding that with OPEC countries focused on boosting domestic refining capacity to meet local demand and ramp-up exports of refined products, additional crude oil exports from Brazil and Canada will be higher than those from the Middle East.

OPEC Secretary General Mohammad Sanusi Barkindo told reporters on Sunday it was too early to tell whether production cuts would be extended beyond May, but attempted to reassure investors that for now it was “so far, so good.”

Barkindo was speaking to reporters in Houston ahead of the CERAWeek conference starting Monday. Oil ministers from Saudi Arabia, Russia and Iraq are among speakers at the annual gathering, as are major oil company CEOs.

In response to a question on whether the market was rebalancing in the face of large U.S. supply, Barkindo said: “It depends who you talk to and it depends on what inventories you are looking at.”

 

 

 

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