The IEA sees demand for OPEC oil actually declining in absolute terms over the next few years as it is edged out of the market by non-OPEC supply. Output hit a record 10.057 million bpd in November, according to the US Energy Department.
Soaring oil production from the United States is set to buoy global oil demand through 2020, but the International Energy Agency (IEA) has warned that more investment will be needed to boost supplies after that.
However, the output is expected to grow by only 6.4 mbd to reach 107 mbd by 2023. By 2023 the level of spare production capacity that could be used in the event of a disruption will be the lowest since 2007.
"We can not ignore the growth coming from shale", IEA Executive Director Fatih Birol told reporters at a briefing as CERAWeek kicked off. Prices are less than half that today.
Which brings me back to the IEA.
However, despite falling costs, additional investment will be needed to spur supply growth after 2020, said IEA. As you recall, a few years ago, OPEC members overflooded the world with crude oil to force the U.S. shale producers out of business. The future role of oil is "widely misunderstood", Nasser said Tuesday, emphasizing that oil demand globally remains healthy.
While oil stocks typically rise this time of year as refineries frequently close for maintenance, an increase in USA crude inventories has weighed on prices.
While more stringent emissions regulations and rise of electric vehicles and switch to natural gas vehicles will slow demand for oil, the fastest-growing source of global oil demand growth will be petrochemicals, particularly in the United States and China.
Crude oil prices tested resistance near a downward sloping trend line that connects the highs in February to the highs in March and comes in near Tuesday's highs at 63.30. The latest forecast from the Department of Energy sees U.S. production topping 11 million barrels a day by November and growing further next year. Birol noted "the world needs to replace 3 million B/D of declines each year-the equivalent of the North Sea".
He added that USA producers are also able to tap capital markets more expertly, which is vital at a time when analysts insist that much more investment is required to meet future demand: "A major concern is our industry's inability to attract capital; this is extremely risky".
The shift represents a major challenge to the oil industry, as numerous petrochemicals will be produced using gas, cutting out refineries. We had a really wonderful conversation, said Tim Dove, CEO of Pioneer Natural Resources Co.
Meanwhile, a new marine fuel rule with lower sulfur content that is to come into force in 2020 is creating uncertainty in the market.
Global oil industry players are also concerned about threats from renewable energy technologies and rapid changes to the automobile industry.