KUALA LUMPUR: The two-month bullish run of crude oil has come to an end, following a sober report from the International Energy Agency (IEA) on its outlook.
The IEA has forecasted that oil to be between US$50 and US$70 between now and 2040. It also has stated that the current up-trend would not led to a new normal for oil prices as supply continues to outstrip demand.
Until the middle of next year, global oil supply is expected to outstrip demand, largely due to increase in production from non-OPEC countries.
The US is expected to dominate the global oil market and is in a position to be the undisputed leader until 2025 and onwards. This is largely due to technological advances leading to shale oil increasing output by eight million barrel per day.
Below are the highlights
1) Oil supply to exceed demand in the first half of next year, causing downward pressure on the commodity. The supply is expected to outstrip demand by 600,000 barrels per day (b/d) in the first quarter next year and 200,000 b/d in the second quarter.
2) Oil is not expected to sustain its current price up-trend. Between now and 2040, the IEA is looking at a scenario of oil trading between US$50 to US$70 per barrel.
3) Among the assumptions are the US being the world’s largest producer of oil, technology advancement reduces cost of production, rapid growth in electric cars causing a lower demand for oil and increasing alternative sources of energy such as solar.
4) Global demand for oil is expected to grow at 30% between now and 2040, much slower compared to the past.
5) Biggest demand to come from India and China. Demand in Europe, the US and Japan expected to decline.
6) The US, already a net exporter of gas, will become a net exporter of oil in the late 2020s, accounting for 80% of the increase in global supply..
7) Shale oil to increase by eight million barrel per day until 2025, pushing the US to be the undisputed leader and having the highest sustained period of oil output growth by any single country in the history of oil markets.
8) By mid-2020s, the combined output from conventional and shale oil and gas fields in the US will increase by 50%, higher than any other country has ever managed.
9) The number of electric vehicles on the road, which is now 2 mil, is expected to increase to 25 million by 2025 and almost 300 million by 2040.
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