New 5 year forecast by IEA raises supply concern amidst surging demands by 2020
Latest five-year oil market forecast from the International Energy Agency (IEA) has said that global oil supply could struggle to keep pace with demand after 2020. This means that a sharp increase in prices may compound demand woes if new schemes are not explored as soon as possible.
IEA had earlier observed that Organisation of the Petroleum Exporting Countries (OPEC), export revenues slumped to an estimated $450 billion in 2016, down from $1.2 trillion in 2012, causing major budgetary strains and in some cases making difficult political situations even worse.
However, federal government seems to be restructuring to beat the expected shock as it has set schemes in motion to bring down the cost of production and initiate right policies to attract investments.
According to the Minister of States for Petroleum Resources, Ibe Kachikwu, Nigeria is already working to bridge the investment gap in Nigeria, by setting a target of attracting more than $10 billion of fresh investments in the oil and gas industry in the next five years.
He explained that the new investments would address some of the challenges the industry was currently facing, covering pipelines development, refineries rehabilitation, gas and power infrastructure, facility refurbishment and upstream financing.
IEA noted in its report that “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 United States (U.S.) 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 million barrels per day (mb/d) threshold in 2019 and reaching about 104 mbpd 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.
Dr Fatih Birol, the IEA’s Executive Director who signed off the report said “We are witnessing the start of a second wave of U.S. supply growth, and its size will depend on where prices go,” arguing that “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.
“The largest contribution to new supplies will come from the United States. The IEA expects U.S. Light Tight oil (LTO) production to make a strong comeback and grow by 1.4 mbpd by 2022 if prices remain around USD 60/bbl. Expectations for U.S. LTO are higher than last year’s forecast thanks to impressive productivity gains.