Warmer weather, rising non-Opec output threaten oil market balance

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".

Under its "New Policies Scenario", based on existing legislation and announced policy intentions relative to emissions and climate change, the oil price should continue to rise towards $83 a barrel by the mid-2020s.

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.

The IEA noted that output by the Organization of the Petroleum Exporting Countries was down by 830,000 bpd year-on-year in October, although demand for the group's crude is expected to fall to 32.6 million bpd in the fourth quarter of this year and to 32.0 million bpd in the first quarter of 2018.

"The IEA slashing its oil demand growth forecast for this year and the next has dampened some of the bullish sentiment prevailing in the market", Abhishek Kumar, Senior Energy Analyst at Interfax Energy's Global Gas Analytics in London.

This sentiment comes in part on the back of rising USA oil output, which has grown by more than 14 percent since mid-2016 to a record 9.62 million barrels per day (bpd). Oil demand, it says, is slowing down, but it will not be reversed before 2040, even as electric-car sales rise steeply.

The US government said on Monday US shale production in December would rise for a 12th consecutive month, increasing by 80,000 bpd.


Unless OPEC agrees to cut more production, output from non-member states will leave the market in surplus and limit the rally in oil prices, the IEA said.

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

The U.S. shale surge could also mean an era of lower-for-longer oil prices.

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.

Oil prices held largely steady on Tuesday as the prospect of further rises in USA output offset some of the optimism that OPEC-led production cuts would tighten the balance between crude supply and demand.

The International Energy Agency on Tuesday delivered a more cautious outlook for oil demand.

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.


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