Without new projects, oil supply will lag demand after 2020

HOUSTON / WAM

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
five-year oil market forecast from the International Energy Agency (IEA).
The global picture appears comfortable for the next three years but supply growth slows considerably after that, according to 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.
In the next few years, oil supply is growing in the United States, Canada, Brazil and elsewhere but this growth could stall by 2020 if the record two-year investment slump of 2015 and 2016 is not reversed.
While investments in the US shale play are picking up strongly, early indications of global spending for 2017 are not encouraging.
Oil demand will rise in the next five years, passing the symbolic 100 mb/d threshold in 2019 and reaching about 104 mb/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. While electric vehicles are an important factor for oil demand, the IEA estimates they will displace only limited amounts of transportation fuel by 2022.
“We are witnessing the start of a second wave of US supply growth, and its size will depend on where prices go,” said Dr. Fatih Birol, the IEA’s Executive Director. “But this is no time for complacency. We don’t see a peak in oil demand any time soon. And unless investments globally rebound sharply, a new period of price volatility looms on the horizon.”