Global crude oil demand to ease on warm climate

Global crude oil demand to ease on warm climate

It seems that OPEC and the International Energy Agency live in different worlds when it comes to projecting future energy demand.

With big gains forecast in its output of shale oil, the United States is expected to become a net oil exporter by the mid-2020s, the IEA said, adding that the USA will account for 80 per cent of the increase in the global oil supply to 2025, which will maintain near-term downward pressure on prices. But analysts expect the price to not rise much further in coming months as the USA ramps up production.

The benchmark report notes that with renewable energy technologies nipping at the heels of oil, natural gas and coal and a global push by policymakers to cut carbon emissions, juxtaposed with near-insatiable demand from a global population that will hit 9 billion within a few decades and the rise of the USA as the world's largest oil and gas producer, the energy sector is experiencing disruptive times.

Two major trends are unfolding in global oil and gas markets, but Canada seems unable to take advantage of the first one, and is already an unfortunate casualty of the other, says a new report.

Oil producers who signed up to a landmark production cut agreement mostly stuck to the deal, with the compliance rate at 96 percent in October, and 87 percent for the year to date, the IEA also said. Indeed, the IEA also suggests that demand for oil will remain supported by lower prices, going forward.

"Yet this is precisely what is happening as a result of the US shale revolution - both for oil and for natural gas", the IEA said.


That will keep prices down and help make the USA a net exporter of oil - in addition to gas - by the late 2020s.

At the same time, the renewable energy sources will become more important.

"The oil market should be able to find a longer-term equilibrium, with the oil price in a range of $50-70 a barrel", the agency said.

The Paris-based group said it cut its demand outlook for next year by 190,000 barrels a day, and global production could vault above demand by 600,000 barrels a day in the first quarter of 2018, and by 200,000 barrels a day in the second quarter.

"Although Canada has potentially prolific shale gas plays ... their estimated development cost is higher on average than in the Permian or the Appalachian Basin and they are further away from the demand hub", the IEA said.

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.

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