Published: Wed, November 15, 2017
Finance | By Kristine Clayton

Oil continue to rise towards $83 a barrel by mid

Oil continue to rise towards $83 a barrel by mid

Global oil demand is expected to keep rising over the next two decades, albeit at a steadily decreasing pace, according to a new report released Tuesday by the International Energy Agency.

"Oil is already facing stiff competition from ever-cheaper and more environmentally friendly energy sources as traditional fossil fuel users switch to cleaner, low-carbon alternatives", IEA said in its World Energy Outlook 2018. This latest move comes as investors expect figures to show U.S. oil production has risen.

The largest contribution to demand growth - nearly 30 per cent -would come from India, whose share of global energy would rise to 11 per cent by 2040, it says. This is expected to cut 2.5 million bpd, or about 2 percent, off global oil demand by that time.Still, the IEA's "New Policies Scenario", based on existing legislation and announced policy intentions, expects oil prices to rise towards $83 a barrel by the mid-2020s.

The IEA also revised down its 2018 oil demand forecast for Brazil from 3.15 million bpd to 3.13 million bpd.

Both benchmarks early in the previous week hit highs last seen in 2015, but traders said the market had lost some momentum since then.

The Paris-based IEA cut its oil demand growth forecast by 100,000 barrels per day (bpd) for this year and next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018.

IEA said that if current levels of OPEC production were maintained, the oil market would face a "difficult challenge" during the first quarter of 2018 on the back of supply exceeding demand by 600,000 bbl/day followed by another, smaller, surplus of 200,000 bbl/day in the second quarter of the year.

The U.S. shale surge could also mean an era of lower-for-longer oil prices. The IEA estimates that there will be 50 million electric vehicles on the road by 2025 and 300 million by 2040, from closer to 2 million now.

Compliance by the group with its joint 1.8-million-bpd output cut with 10 partners was 96 percent in October, the highest since the supply-reduction deal took effect in January. Scientists just this week said that emissions of the heat-trapping gas rose this year after three years of not growing.

Chris Watling, CEO and chief market strategist at Longview Economics, was quoted as saying that the adoption of EVs could lead to global peak oil demand as soon as 2023, which will result in oil prices crashing to $10.

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

Overall global energy needs are seen rising more slowly than in the past, but are still projected to expand by 30 per cent between today and 2040.

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