IEA says hopes of higher, stable oil prices could be dashed quickly

Marcus Newton
November 15, 2017

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.

Oil prices have risen in recent months, after both Opec and non-Opec countries struck a landmark deal at the end of past year to cut back production to combat a global oil glut.

Global oil demand growth looks likely to increase more slowly over the coming months, as warmer temperatures cut consumption, which may tilt the market back into surplus in the first half of next year, the International Energy Agency said on Tuesday. U.S. West Texas Intermediate (WTI) crude was at $56.72 per barrel, down 4 cents.The dips came after both crude benchmarks early last week hit highs last seen in 2015, but traders said the market had lost some momentum since then."Oil is fairly calm".

Reducing the use of fossil fuels is a key demand from activists and many governments taking part in the global climate talks in Bonn, Germany, this week.

"This is the equivalent of adding another China and India to today's global demand", the IEA said in its report.

Having said that, the IEA points out that over the next 25 years, the world's growing energy needs will be met first by renewables and natural gas "as fast-declining costs turn solar power into the cheapest source of new energy electricity generation".

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In its monthly oil market report, the Paris-based IEA cut its oil demand forecast by 100,000 barrels per day (bpd) for this year and next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018.

The IEA estimates that there will be 50 million electric vehicles (EVs) on the road by 2025 and 300 million by 2040, from closer to 2 million now.

Compliance by the group with its joint 1.8-million-bpd output cut with 10 partners was 96 percent in October, the highest since the supply-reduction deal took effect in January.

"Next year's demand growth will struggle to match this", the IEA said.

Chris Watling, CEO and chief market strategist at Longview Economics, was quoted as saying that the adoption of EVs could lead to global peak oil demand as soon as 2023, which will result in oil prices crashing to $10.

"None of its core scenarios for the future of energy provide a reasonable chance that the world will avoid climate catastrophe", said Adam Scott, senior advisor at Oil Change International.

Other reports by MaliBehiribAe

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