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EIA: Global Oil Supply to Lag Demand After 2020

EIA: Global Oil Supply to Lag Demand After 2020 thumbnail

Global oil discoveries fell to a record low in 2016 as companies continued to cut spending and conventional oil projects sanctioned were at the lowest level in more than 70 years, according to the International Energy Agency (EIA).

Both trends could continue this year, and the EIA warns that global oil supply could lag demand after 2020 unless new investments are approved soon.

Oil discoveries declined to 2.4 billion barrels in 2016, compared with an average of nine billion barrels per year over the past 15 years. Meanwhile, the volume of conventional resources sanctioned for development last year fell to 4.7 billion barrels, 30 percent lower than the previous year as the number of projects that received a final investment decision dropped to the lowest level since the 1940s.

This sharp slowdown in activity in the conventional oil sector was the result of reduced investment spending driven by low oil prices. It brings an additional cause of concern for global energy security at a time of heightened geopolitical risks in some major producer countries, such as Venezuela.

The slump in the conventional oil sector contrasts with the resilience of the U.S. shale industry. There, investment rebounded sharply and output rose, on the back of production costs being reduced by 50 percent since 2014. This growth in U.S. shale production has become a fundamental factor in balancing low activity in the conventional oil industry.

Conventional oil production of 69 mb/d represents by far the largest share of global oil output of 85 mb/d. In addition, 6.5 mb/d come from liquids production from the U.S. shale plays, and the rest is made up of other natural gas liquids and unconventional oil sources such as oil sands and heavy oil.

With global demand expected to grow by 1.2 mb/d a year in the next five years, the IEA has repeatedly warned that an extended period of sharply lower oil investment could lead to a tightening in supplies. Exploration spending is expected to fall again in 2017 for the third year in a row to less than half 2014 levels, resulting in another year of low discoveries. The level of new sanctioned projects so far in 2017 remains depressed.

“Every new piece of evidence points to a two-speed oil market, with new activity at a historic low on the conventional side contrasted by remarkable growth in U.S. shale production,” said Dr Fatih Birol, the IEA’s executive director. “The key question for the future of the oil market is for how long can a surge in U.S. shale supplies make up for the slow pace of growth elsewhere in the oil sector.”

The U.S. shale industry has lowered its costs to such an extent that in many cases it is now more competitive than conventional projects. The average break-even price in the Permian basin in Texas, for example, is now at $40-45/bbl. Liquids production from U.S. shale plays is expected to expand by 2.3 mb/d by 2022 at current prices, and expand even more if prices rise further.

The deepwater offshore sector, which accounts for almost a third of crude oil production and is a crucial component of future global supplies, has been particularly hard hit by the industry’s slowdown. In 2016, only 13 percent of all conventional resources sanctioned were offshore, compared with more than 40 percent on average between 2000 and 2015.

In the North Sea, for instance, oil investments fell to less than $25 billion in 2016, about half the level of 2014. Coincidentally, this is now approaching the level of spending in offshore wind projects in the North Sea, which has doubled to about $20 billion in the same period.

18 Comments on "EIA: Global Oil Supply to Lag Demand After 2020"

  1. bobinget on Thu, 27th Apr 2017 11:18 am 

    These days, North American oil, collaterally damaged. Saudis blew off 50 Billion$ trying to sink competition. And failed.

    Currently, The US is being deluged with crude oil from Finite storage. China, Russia, going for the gold.

    Venezuela, with the largest stash of crude oil on land, off shore, in the world. Once Venezuela collapses,
    China and Russia foreclose on enough oil to control markets.

  2. Davy on Thu, 27th Apr 2017 12:41 pm 

    More bob-bs! Bob so you are saying China and Russia are going to invade and hold Venezuela once it collapses to secure their debt? Go back to school bob you are just jabbering nonsense as usual.

  3. Outcast_Searcher on Thu, 27th Apr 2017 1:01 pm 

    If oil demand exceeds supply by a significant amount for a significant period of time, the price will rise, incenting additional E&P, and ending the current glut.

    That’s the way market’s work. Especially the cyclical crude oil market. Next?

  4. Sissyfuss on Thu, 27th Apr 2017 1:25 pm 

    Rockman says the latest tech provides the hiding places for most of the last existing fields and some are left til economics makes it feasible to extract. The population is going up, ever up, the ICEs are being added exponentially, and the fact that oil is not abiotic portends the chart above to continue on it’s downward course.

  5. Boat on Thu, 27th Apr 2017 2:33 pm 


    And there is BP who figured out how to see below salt domes. Just today they announced a big find in the gulf using the new tech.

  6. Bob on Thu, 27th Apr 2017 2:46 pm 

    A 5% yearly decline rate tells you everything you need to know. Project forward 20 years and there won’t be much left to talk about. Soon wind/solar/conservation will be all we will have. Adjust now, avoid the rush.

  7. Plantagenet on Thu, 27th Apr 2017 3:00 pm 

    If the EIA is right and oil demand will start to outstrip supply in 2020, then that means we’ll still be in the oil glut for the rest of 2017, as well all of 2018 and 2019.


  8. fotboll tröjor on Thu, 18th May 2017 8:59 am 

    Keep up the awesome work !! Lovin’ it!
    fotboll tröjor

  9. Cloggie on Thu, 18th May 2017 9:28 am 

    Within 5 minutes we have posts from two “Icelanders”: fotboll tröjor and billiga tygmärken, saing how wonderful it is over here.

    Go home, trölle bots.

  10. makati1 on Thu, 18th May 2017 9:40 am 

    Outcast, higher prices will kill oil faster than depletion. Who will buy it? A few million elite? Food and shelter will soon be the major priority for most Westerners, not oil. Oil is in the “Goldilocks” region. High prices kill the economy. Low prices kill the ability to recover it at a profit. Both kill the ability to consume oil. only a small price range keeps it all barely working, and that range is dropping.

  11. joe on Thu, 18th May 2017 10:02 am 

    Mak peak oil is here, ok. The world oil demand is around 96mbpd oil output is roughly equal to that, and tight oil accounts for roughly half of US oil output. We’ve been in this predicament more or less since 2005, wages for most people is more or less flat, national debt is massive, inflation is flat but even that small increase hurts consumers due to low wages increase, so oil cant go up because it would destroy demand, if it does, its will be a bad signal. Debt from TARP to Simulus acts 2008-2016 have kept us from eating or young. But that day is closer than most think. The reasons 50% of Americans voted Trump have not vanished, even if Trump does.

  12. Apneaman on Thu, 18th May 2017 10:42 am 

    A Generation of Sociopaths review – how Trump and other Baby Boomers ruined the world

    Bruce Cannon Gibney’s study convinces Jane Smiley of the damage her own American generation has done

    “The boomers have made sure that they themselves will live long and prosper, but only at the expense of their offspring. That we are skating on thin ice is no solace: “Because the problems Boomers created, from entitlements on, grow not so much in linear as exponential terms, the crisis that feels distant today will, when it comes, seem to have arrived overnight.”

    I’m Gen-X, so I get a free pass.

    OFF WITH THEIR HEADS!! shout the impoverished dystopian millennial grand kids.

  13. Cloggie on Thu, 18th May 2017 10:45 am 

    I’m Gen-X, so I get a free pass.

    I wouldn’t bet on it if I were you.

  14. Cloggie on Thu, 18th May 2017 10:59 am 

    national debt is massive

    Average national debt EU countries declined from 91.5 to 90.1% in one year:

    France 96%, UK 89%, Germany 71%, Netherlands 60%.

    Mr Euro Jeroen Dijsselbloem aims at 40% for the Netherlands:

  15. onlooker on Thu, 18th May 2017 11:21 am 

    And some of these baby boomers recoil from blame by convincing themselves a Greenie-Renewable-Electric techno-utopia is on the way

  16. DerHundistlos on Thu, 18th May 2017 2:33 pm 

    A Generation of Sociopaths review – how Trump and other Baby Boomers ruined the world

    Addendum from article:

    “As I watch my fellow boomers, Paul Ryan, Donald Trump and Mike Pence grin and fistbump at the idea of killing their fellow Americans with their newly passed health bill, I suspect that no one, not even their children, can redeem these people.”

  17. Davy on Thu, 18th May 2017 3:22 pm 

    “Average national debt EU countries declined from 91.5 to 90.1% in one year: France 96%, UK 89%, Germany 71%, Netherlands 60%.”

    Wow, first do you believe those numbers? In today’s age of manufactured results and goal seeking projections numbers are meaningless unless you dig very deep and in multiple locations. Governments are lying through their teeth on economic fundamentals. This is a joke: “91.5 to 90.1%”. Big deal, this is not even a margin of error. This is the type of talk that is a massive cover up of what is really a global economy in stagflation and dysfunction.

    Europe right now is facing serious deflation, low growth, and non-performing sovereign debt. Much of southern Europe is on EU life-support. Northern Europe is little better because they are tied to the south in risk exposure. The US is tied to it also. When I read people crow about how the economies are improving like this I scratch my head and think, wow, this person is oblivious to economic reality.

  18. Davy on Thu, 18th May 2017 3:31 pm 

    AND, then there is China…..

    “Chinese Insurer Warns Of “Mass Defaults, Social Unrest” Due To “Mass Redemption” Run”

    “in a stunning announcement made by one of China’s largest insurers, Foresea Life has warned of “mass defaults and social unrest” unless China’s regulator lifts a recent ban on its issuance of new products. In a letter to China’s insurance regulator, first reported by the Financial Times, Foresea Life Insurance which is a heavy investor in WMPs, has warned that the company expects “redemptions” of 60 billion yuan, or $8.7 billion, this year and might be unable to meet payouts unless it is able to sell new products. Just so there is no confusion, this is the definition of a ponzi scheme, and now that it has been so explicitly framed the result could be even greater redemptions, i.e., “bank runs” across companies that invest in WMPs.”

    “Meanwhile, Foresea’s warning that “mass redemptions” could leave the group unable to meet payouts highlights the liquidity risk created by taking on short-term liabilities to purchase long-term, illiquid assets. In a further crackdown on China’s unsustainable shadow banking system, in May the CIRC imposed a similar three-month ban on Anbang and accused the group of “wreaking havoc” in the market with aggressive sales tactics. The agency specifically criticized Anbang for selling products with short maturities. On the other hand, however, while such a regulatory crackdown is long overdue, should the “shadow” funding of “insurers” like Foresea (and Anbang) be halted, the company – which by its own admission is a ponzi scheme – would disintegrate. But a far bigger problem, one which not even the PBOC would be able to contain, is what happens if accelerated “redemption” problems, currently limited to just Foresea, spread to the rest of the nearly $10 trillion shadow banking industry.”

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