Oil supply growth could stall by 2020 – IEA

A ‘sharp’ increase in oil prices could occur after 2020 as global oil supply struggles to keep pace with growing demand, according to the latest five-year oil market report from the International Energy Agency (IEA).

The IEA’s Oil 2017 report, previously known as the Medium-Term Oil Market Report, says that the oil supply picture is comfortable for the next three years, but in the absence of new upstream projects supply growth could slow considerably after that. The demand and supply trends point to a tight global oil market, says the IEA, with spare production capacity in 2022 falling to a 14-year low.

Oil supply is currently growing in the US, Canada and Brazil but this could stall by 2020 if a record investment slump in oil production in 2015 and 2016 is not reversed, says the IEA. There are suggestions that investments in US shale oil and gas are picking up, but on the whole the IEA says that early indications of 2017 spending are not encouraging.

The IEA forecasts that oil demand will rise past the milestone of 100mn barrels per day in 2019, reaching around 104mn barrels per day in 2022. The growth here is accounted for by developing countries – mainly in Asia. By 2020 oil demand growth in India will have outpaced China, says the IEA. 

In terms of supplies, tight oil in the US is set to make the largest contribution to new supplies – growing by 1.4mn barrels per day by 2022, providing prices remain around $60 per barrel. Within OPEC, the bulk of new supplies will come from the major low-cost Middle Eastern producers – Iraq, Iran, and the United Arab Emirates, says the IEA.

The IEA forecasts that electric vehicles will displace only a small amount of transportation fuel by 2022.