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IEA warns of potential shortage of global oil supplies in 3 years


The recent drop in oil industry investment brought on by weak prices threatens to significantly slow supply growth in the long term, and could lead to a shortage when it comes to meeting global demand, the International Energy Agency said in its five-year oil market forecast released Monday.

That may happen even as crude stockpiles in the U.S. and elsewhere climb over the next few years, the IEA said in its “Oil 2017” report.

“If the record two-year investment slump of 2015 and 2016 is not reversed,” supply growth may stall by 2020, it said, pointing out that global oil and gas upstream, or exploration and production, investment fell by 25% in 2015 and by another 26% in 2016.

This year, it’s “evident” that under the Organization of the Petroleum Exporting Countries-led production cut agreement, output reductions are taking place just as production from the non-OPEC sector, led by the U.S., is recovering.

This ample supply, even as output cuts are implement, is the reason for the “very flat crude-oil price futures curve on which our five-year forecast is based,” the IEA said.

International Energy Agency’s Oil 2017 report

Brent crude futures LCOK7, +0.37%  traded on the ICE Futures exchange in London have traded in a tight range between $53 and $58 a barrel since the start of the year, while West Texas Intermediate crude CLJ7, +0.47%  on the New York Mercantile Exchange has traded between $50 and $55 this year.

The key takeaway from the IEA report is the “looming imbalance,” Matt Parry, IEA senior oil economist, told MarketWatch by email from Paris.

A large potential supply deficit may take hold around 2020, “as demand growth is consistently forecast to outstrip projected increases in global oil supplies,” he said. “A net demand gain of 7.3 [million barrels per day] is forecast [for] 2016-22—vastly exceeding the projected supply growth of under 6 mb/d.”

The IEA report said that demand and supply trends point to a tight global oil market and in 2022, spare production capacity may fall to 14-year low.

For now, “we are witnessing the start of a second wave of U.S. supply growth, and its size will depend on where prices go,” Dr. Fatih Birol, the IEA’s executive director, said in a statement. “But 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,” he said.


14 Comments on "IEA warns of potential shortage of global oil supplies in 3 years"

  1. rockman on Tue, 7th Mar 2017 10:52 am 

    “we are witnessing the start of a second wave of U.S. supply growth, and its size will depend on where prices go,” Dr. Fatih Birol”. Not according to the EIA: the lasts number for Dec 2016: 272,284,000 bbls. For 2015: 286,376,250 bbls/month. Average for 2016: 270,720,750 bbls per month.

    So while higher oil prices might lead to more drilling and more NEW oil production: depletion, like rust, never sleeps. Time will tell if the net change for 2017 will be positive or negative.

  2. BobInget on Tue, 7th Mar 2017 11:27 am 

    While I’ll admit, US presidents don’t really have much to do with supply side oil.

    Our brand new president however is fixin to do away with doing away with milage standards for
    new automobiles. (CAFE)

    Except for Tesla, there goes the electric car.

    GM for instance, makes thousand$ on new SUV’s but loses money on the ‘Bolt’ pure electric. GM, Ford etc only make electrics to lower ‘fleet milage’.
    Obama set 50 MPG fleet milage targets, Trump, if he survives, plans to do away with CAFE.

    Never in American history has the fate of our nation, indeed the planet been more dependent on the FBI.

  3. Jerry McManus on Tue, 7th Mar 2017 11:34 am 

    I’m with the Rockman.

    And while I’m certainly no expert, the phrase “looming imbalance” sounds suspiciously like “peak oil” by any other name.

    And let us not forget that pesky little problem of “reserve replacement”, something folks working for the propaganda machine are claiming will NEVER be a problem.

  4. rockman on Tue, 7th Mar 2017 12:05 pm 

    “Our brand new president however is fixin to do away with doing away with milage standards for new automobiles. (CAFE0” If one looks at the actual change in the fuel efficient of the ROLLING FLEET of US vehicles over the last 10 years that improvement has been insignificant. Hundreds of links about NEW car sales mpg but can’t find the one I turned up a couple of years ago for improvement of the efficiency of the average vehicle ON THE ROAD…not just the new ones being sold. As a result of the average car running 10+ years the improvement of the rolling fleet average mpg has been something on the order of less than 1% per year. So while NEW vehicles are burning less fossil fuel the existing fleet on the road is burning almost as much as it was 5 or 6 years ago. President Trump changing CAFE standards for future sales won’t have much impact on the rolling fleet metric for at lest 10 years.

  5. Outcast_Searcher on Tue, 7th Mar 2017 12:15 pm 

    But, no worries. The ETP folks tell us that the price of oil MUST come way down as time goes on. They are absolutely convinced of that, and they assure us of that.

    So why should we worry about little issues like supply, demand, production cost, competition, etc?

    Oil will be dirt cheap! Whoopie.


    (As an aside, I’m not exactly selling my long term holdings in oil stocks and MLP’s.)

  6. rockman on Tue, 7th Mar 2017 1:15 pm 

    Outcast – Speaking of stock holdings: did you see my post an hour ago in the thread pissing on Chesapeake? I don’t track that stock so was surprised to see how Wall Street has viewed the efforts of the new management team trying to fix the nightmare Aubrey left behind: in the last 13 months the stock price has gone up 230%. Have any of your holdings matched that gain? LOL.

  7. Robert on Tue, 7th Mar 2017 9:44 pm 

    Just need a date when everything goes to hell so i can run before unemployed, starving soccer moms try to get me

  8. James boags on Tue, 7th Mar 2017 10:19 pm 

    Glut or shortage the oil price just doesn’t like being above $54 by sheer coincidence that the same figure the hills group said would be the averages for this year.

  9. James boags on Tue, 7th Mar 2017 10:27 pm 

    I think they must have a crystal ball called the etp model

  10. TheNationalist on Wed, 8th Mar 2017 7:30 pm 

    Here in Australia our government policy is in meltdown. Same week as the Climate Change Institute closes down we have an energy supply crisis. Basically multinationals get more selling our gas overseas. As a result our domestic electricity market has gas power stations that are too expensive to turn on and we get blackouts. Australia has the highest population growth in the OECD demanding ever more gas to burn and our globalist government is powerless to change course and blames wind and solar. The country retreats into religion,superstition and identity politics and coal wins, its sad really.

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