Economy

Oil market could tip out of balance on rising non-Opec production

Oil market could tip out of balance on rising non-Opec production

Indeed, the IEA also suggests that demand for oil will remain supported by lower prices, going forward. Though solar power is set to become the cheapest source of new electricity generation and the boom years for coal are over, oil and gas will continue to meet the bulk of the world's energy needs, the IEA said.

"The IEA slashing its oil demand growth forecast for this year and the next has dampened some of the bullish sentiment prevailing in the market", Abhishek Kumar, Senior Energy Analyst at Interfax Energy's Global Gas Analytics in London. The Organization of the Petroleum Exporting Countries' latest monthly data showed Venezuela reporting production of 1.955 million bpd in October, versus 2.085 million in September.

With big gains forecast in its output of shale oil, the United States is expected to become a net oil exporter by the mid-2020s, the IEA said, adding that the USA will account for 80 per cent of the increase in the global oil supply to 2025, which will maintain near-term downward pressure on prices.

The report says that global energy demand is expected to grow 30 percent by 2040 and that demand for oil is not expected to peak until 2040. But analysts expect the price to not rise much further in coming months as the US ramps up production.

"I think this group of committed and responsible producers came together. and I think they will continue to do what it takes to take us to the next level", he said at an worldwide oil conference. The effort, which started in January, is credited with pulling the price of oil back from the sub-$30 per barrel range last year to two-year highs in recent sessions. From then through 2040, greater fuel efficiency and more fuel switching lowers oil use for transportation.

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The IEA estimates that there will be 50 million electric vehicles (EVs) on the road by 2025 and 300 million by 2040, from closer to 2 million now. Next year, demand is seen hitting 98.9 million bpd, up 1.3 million bpd from this year.

A study by Bank of America Merrill Lynch forecasts that pure electric vehicles would achieve a global penetration of 12 per cent in 2025, 34 per cent by 2030 and 90 per cent by 2050.

Also weighing on the oil price, is the increasing prospect of a slower pace of economic growth in China.

Between 2017 and 2040 the IEA estimates that more solar power capacity will be added globally each year than any other source of energy, with an annual average increase of almost 70 gigawatts.