International Energy Agency (IEA) released its annual Medium-Term Oil Market Report (MTOMR) today.
Oil is way to cheap right now. We get told since decades that the black stuff is running out. Petrol hasn't been that cheap in a long time, making electric cars uninteresting. A high oil price would increase the pressure on alternative energy sources. There is though change in sight.
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The International Energy Agency (IEA) says in its annual Medium-Term Oil Market Report (MTOMR) that global oil supply growth is plunging as an extended period of low prices takes its toll.
While U.S. light, tight oil (LTO) output is falling steeply for now, the market will begin rebalancing in 2017. By 2021 the United States and Iran are seen leading production gains among non-OPEC and OPEC countries, respectively.
“It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not-too-distant-future,” said IEA Executive Director Fatih Birol, launching the report at IHS CERAWeek.
The report sees 4.1 million barrels a day (mb/d) being added to global oil supply between 2015 and 2021, down sharply from the total growth of 11 mb/d in the period 2009-2015.
The drop in supply growth comes as upstream investment dries up in response to the current glut that is pressuring prices. Global oil exploration and production capital expenditures (capex) are expected to fall 17% in 2016, following a 24% cut in 2015 – which would be the first time since 1986 that upstream investment has fallen for two consecutive years.
The full IEA Medium-Term Oil Market Report 2016 is available as pdf here.
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