IEA oil demand forecast scaled back

IEA oil demand forecast scaled back

IEA oil demand forecast scaled back

Both benchmarks early in the previous week hit highs last seen in 2015, but traders said the market had lost some momentum since then.

"Using a scenario whereby current levels of Opec [Organisation of the Petroleum Exporting Countries] production are maintained, the oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 0.6m bpd followed by another, smaller, surplus of 0.2m bpd in 2Q18". In its report presented in London on Tuesday, the agency says global demand for crude continues to grow in the next two and a half decades, although at a steadily increasing pace. This is expected to cut 2.5 million bpd, or about 2 percent, off global oil demand by that time.Still, the IEA's "New Policies Scenario", based on existing legislation and announced policy intentions, expects oil prices to rise towards $83 a barrel by the mid-2020s.

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".

In Abu Dhabi on Monday, the UAE Minister of Energy and Industry Suhail bin Mohammed Faraj Faris Al Mazrouei, said that oil producers were expected to unanimously extend a production cut accord later this month, but its duration was still under discussion. This latest move comes as investors expect figures to show United States oil production has risen.

According to the IEA, China overtakes the USA as the largest oil consumer around 2030, and its net imports reach 13 million barrels per day in 2040. But analysts expect the price to not rise much further in coming months as the USA ramps up production.

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Indeed, the IEA also suggests that demand for oil will remain supported by lower prices, going forward.

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.

Brent crude oil prices recently climbed to two-year highs of more than $60 a barrel due to supply disruptions, geopolitical concerns and a growing expectation that an Opec-led agreement to reduce production will be extended through 2018.

Over the next two decades, the global energy system would be reshaped by four major forces: the USA, as it becomes the 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 path.

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