Oil intake and demand is expected to remain robust in to the 2040s despite a good diversifying global energy combine and the rise of electric car revenue, based on the International Energy Company (IEA).
In its total annual World Energy Outlook 2017 report, posted Tuesday, the IEA said that over the next two decades the global strength landscape will be reshaped by four major forces.
“The United Says is set to become the undisputed global oil and gas leader; renewables are staying deployed rapidly because of falling costs; the show of electric power in the energy combine is growing; and China’s latest economic strategy takes it on a cleaner progress mode, with implications for global strength markets.”
Still, despite an expected rise in solar and wind mainly because major sources of energy as a result of changes in direction within national strength policies such as for example China, India and Europe, the IEA cautioned that it was “too early to write the obituary for oil.”
“Even as rising oil demand decreases, it isn’t reversed before 2040 even while electric-car sales rise steeply,” it said.
“Global oil demand continues to grow to 2040, although in a steadily decreasing rate – while fuel efficiency and growing electrification bring a good peak found in oil used for passenger vehicles, even with a good doubling of the car fleet to 2 billion vehicles,” it said.
It added that additional sectors – namely petrochemicals, trucks, aviation, and shipping – will keep driving up oil demand to 105 million barrels a day by 2040.
The ‘low oil price case’
The IEA’s total annual outlook does not give a forecast of what the energy system will look like but instead presents various projections to 2040 predicated on several policy assumptions, “so that you can give policymakers the tools to make a decision what path to follow,” the IEA noted.
This year’s report seemed numerous potential long-term pathways for oil with each scenario predicated on different assumptions about future policies and technologies.
One situation within the report was first the “low oil cost case,” which viewed what it could take to hold oil prices in a good $50 to $70 a good barrel range (currently a good barrel of oil is just about the $60 mark) completely to 2040.
It said the main conditions of keeping rates within the range were:
A high source assumption for U.S. shale oil;
Widespread uptake of digital and additional technologies that help to keep a lid about costs on the upstream part of the industry (the part that finds and makes crude oil)
Exceptionally rapid growth in the electric car fleet;
And a favorable assumption about the power of the main resource owners to climate the storm of lessen revenues
One of the key findings of the “low oil price case” was that even a rapid growth found in the world’s electric car fleet was first “unlikely to possess a substantial effect on oil intake for passenger transport before mid-2020s,” the IEA said.
“Indeed, in the lack of a significant switch in policy path, there may very well be continued robust progress in additional sectors, including trucks, aviation, maritime transport and petrochemicals. That is a continuation of the good demand progress we are seeing in our short term oil market analysis.”
$60 a barrel oil
The report comes at a time when oil markets are being closely watched for signs of recovery and a rebalancing following a slump in 2014 the effect of a glut in global supply and trailing demand.
Oil prices have already been buoyed lately by the decision by major oil creating group OPEC, and non-OPEC suppliers including Russia, to limit their oil output. Nevertheless, rising U.S. oil productivity is adding a lid on price rises.
Benchmark Brent crude happens to be trading in $62.87a barrel and U.S. West Texas Intermediate at $56.57, and, although a long way off from the lows observed in early 2015 when oil rates tumbled to the mid-$20s, professionals say markets shouldn’t expect rates above $60 a good barrel to last.
On Monday, Fitch Rankings said in its 2018 oil outlook that it assumed 2018 common oil prices will be broadly unchanged year-on-12 months and that the recent price restoration with Brent exceeding $60 per barrel may well not be sustained, Reuters reported.
The IEA agreed, noting on Tuesday in its regular oil marketplace report, that markets shouldn’t expect $60 a barrel to become “the new normal” with more supply expected from non-OPEC producers.
“The reality is that also after most modest reductions to growth, non-OPEC production will follow this year’s 700,000 barrels a evening growth with 1.4 mb/d of additional creation in 2018 and then year’s demand progress will battle to match this. For this reason, absent any geopolitical high quality, we may not have observed a ‘new regular’ for oil rates,” the IEA said.
It added that higher oil rates and relatively mild early on winter temperature ranges had contributed to a good downward revision of its demand forecast in November, revised downwards by 100,000 barrels a evening for both 2017 and 2018. It today sees demand progress of around 1.5 million barrels a evening (mb/d) in 2017, to 97.7 mb/d, and 1.3 million barrels a evening in 2018 to 98.9 mb/d.
The IEA noted that the market would keep on its journey towards a rebalancing, saying that “for the entire marketplace balance, our changes to demand growth, which remains robust, and supply largely cancel each other out.” However, non-OPEC creation was expected to enhance the global way to obtain oil.
“Using a scenario whereby current levels of OPEC creation will be maintained, the oil marketplace faces a hard challenge in the first quarter of 2018 with supply expected to exceed demand by 600,000 barrels a evening followed by another, smaller sized, surplus of 200,000 barrels a day found in the next quarter of 2018,” the IEA said.