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

Chelsea West
November 15, 2017

Brent crude oil prices dipped below $63 a barrel today as the International Energy Agency (IEA) revised its oil demand forecast down due to mild early winter temperatures and rising production from some countries.

This sentiment comes in part on the back of rising USA oil output C-OUT-T-EIA, which has grown by more than 14 percent since mid-2016 to a record 9.62 million bpd.

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

Crude has climbed lately to a two-year high around $57 United States a barrel in trading in NY, although it is not seen making much larger gains due to rising USA output.

"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.

Worldwide, oil consumption is seen reaching 97.7 million bpd in 2017, up 1.5 million bpd from 2016. "Meeting this demand would require an overall investment of around $10.5 trillion across upstream, midstream and downstream operations" Opec Secretary-General, Mohammad Barkindo, said noting that the 2017 outlook was more positive than previous year, partly thanks to oil exporting nations' efforts to stabilise the market.

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

After hitting a 10-year low of less than $30 in January, down from a peak of more than $100 in mid-2014, oil prices have recently been hovering around the $55 mark. This latest move comes as investors expect figures to show United States oil production has risen.

Saudi Crown Prince Mohammed bin Salman said in October that the deal was working and demand was moving closer to the level of supply, but extraordinary action was needed for further rebalancing.

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

"Solar is forging ahead in global power markets as it becomes the cheapest source of electricity generation in many places", said Fatih Birol, executive director of the IEA.

However, even rapid growth in the electric vehicle fleet would be unlikely to have a substantial impact on oil consumption for passenger transport until the mid-2020s, it said.

Other reports by TheSundaySentinel

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