Don't buy the tight-market hype, IEA says

Lloyd Doyle
November 14, 2017

"This is why, absent any geopolitical premium, we may not have seen a "new normal" for oil prices".

If US production stays at current levels, the IEA said, and a trend towards adopting electric cars accelerates, prices could stay between US$50 and US$70 a barrel until 2040.

The largest contribution to demand growth - nearly 30 per cent - would come from India, whose share of global energy would rise to 11 per cent by 2040, it said.

Some ministers for the Organization of Petroleum Exporting Countries said an extension of an agreement that sidelines about 2 percent of the total global demand for oil in an effort to balance the market was necessary next year. That means that, despite the rapid deployment of wind and solar power worldwide, global Carbon dioxide emissions will continue to rise until 2040, "far from enough to avoid the severe impacts of climate change", the IEA said.

Yet that could still change, the IEA said. "There's big growth coming from shale oil, and as such there'll be a big difference between the US and other producers".

Oil markets were treading water early on Tuesday, continuing the cautious trading seen over the last week as bullish factors such as ongoing OPEC-led production cuts and Middle East tensions are countered by rising US output.


After hitting a 10-year low of less than $30 in January, down from a peak of more than $100 in mid-2014, oil prices have recently been hovering around the $55 mark.

But the price crash had another effect: it forced a wave of innovation that has improved shale producers' productivity and efficiency.

A study by Bank of America Merrill Lynch forecasts that pure electric vehicles would achieve a global penetration of 12 per cent in 2025, 34 per cent by 2030 and 90 per cent by 2050.

"Solar is forging ahead in global power markets as it becomes the cheapest source of electricity generation in many places", said Fatih Birol, executive director of the IEA.

Oil inventories in the world's richest nations fell by 40 million barrels in September, breaking below 3.0 billion barrels for the first time in two years, driven in part by Hurricane Harvey, which shuttered much US refining capacity in August.

The report suggested that over the next two decades, the global energy system would be reshaped by four major forces: the United States as it becomes global oil and gas leader, rapid deployment of renewables, growing share of electricity in the energy mix, and China's new economic strategy taking it on a cleaner growth mode.

Other reports by Iphone Fresh

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