Oil markets should have adequate supply in the period up to 2020, but more investment will be needed to boost production to satisfy market needs after that period as price volatility could affect some producer behaviour, the International Energy Agency (IEA) said Monday.
In a five-year outlook (2018-2023), the Agency said that in current market conditions, the US and other IEA members and non-OPEC producers’ output “more than covers expected demand growth” up until 2020, but after that new investment commitments to developing production capacity will be needed.
“Over the next three years, (output) gains from the United States alone will cover 80 percent of the world’s demand growth, with Canada, Brazil and Norway – all IEA family members – able to cover the rest,” the forecast said.
But the report cautioned that despite falling costs, additional investment will be needed to boost supply growth after 2020.
The IEA predicted that by 2023, global oil demand would hike to 104.7 million barrels per day (mbpd); an increase of 6.9 mbpd from current levels, due largely to “economic growth in Asia and a resurgent petrochemicals industry in the United States.” This demand hike will largely be covered by non-OPEC output increases until 2020, but OPEC will remain a key supplier and invesments will have to rise significantly after 2020.
“The oil industry has yet to recover from an unprecedented two-year drop in investment in 2015-2016, and the IEA sees little-to-no increase in upstream spending outside of the United States in 2017 and 2018,” the Outlook remarked.
“The United States is set to put its stamp on global oil markets for the next five years,” said Dr. Fatih Birol, the IEA’s Executive Director. “But as we’ve highlighted repeatedly, the weak global investment picture remains a source of concern.” Slack investment could lead to a more volatile market and reduce spare capacity on global markets, the IEA affirmed.
“This raises the possibility of oil prices becoming more volatile until new supplies come on line. The US shale sector responded quickly to rising prices both in 2010 and in 2017 and it will continue to adjust to price signals in the future,” it added.
“But there will still be a continued reliance on OPEC countries for a major share of global supply. Within OPEC, more than two million b/d of spare capacity is held in Saudi Arabia. In turn, this emphasises the crucial role OPEC’s largest producer continues to play in providing stability to global oil markets,” the report noted.
Source: Kuwait News Agency