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 5-year oil market forecast from the International Energy Agency.
The global picture appears comfortable for the next 3 years but supply growth slows considerably after that, according to Market Report Series: 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.
IEA’s outlook for demand in the report is little changed from the one it published a year ago: Global oil demand is expected to grow on average by 1.2 million b/d each year to 2022.
Oil demand will pass the symbolic 100 million b/d threshold in 2019 and reach about 104 million b/d by 2022.
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. Indian per capita oil consumption is just 1.2 bbl/year today, and the number is expected to reach 1.5 bbl/year by 2022. This compares to China’s 3 bbl/year today, a figure expected to be 2.5 bbl/year by 2022.
Global oil and gas upstream investment fell 25% in 2015 and another 26% in 2016, affecting the major oil companies and smaller independents alike. While investments in the US shale play are picking up strongly, early indications of global spending for 2017 are not encouraging.
“While the ultimate success or failure of the production agreement cannot be judged for some time, it is evident that the output cuts, totaling 1.8 million b/d if fully implemented, are taking place just as production from the non-OPEC sector as a whole, led by the US, is actually recovering—after falling in 2016 for the first time since 2008—and when stocks of crude oil and products are at record highs. This scenario of ample supply, even as output cuts are implemented, explains the very flat crude-oil price futures curve on which our 5-year forecast is based,” IEA said.