IEA oil demand forecast scaled back

São Paulo - Global demand for oil will fall short of prior expectations this year and the next due to a hike in prices, the International Energy Agency (IEA) said this Tuesday (14). It is certainly true in the passenger auto segment and in power generation, but it is not true in the other two elements of oil demand: "transportation and petrochemicals".

Over the next 25 years, the world's growing energy needs are met first by renewables and natural gas, as fast-declining costs turn solar power into the cheapest source of new electricity generation.

Under its "New Policies Scenario", based on existing legislation and announced policy intentions relative to emissions and climate change, the oil price should continue to rise towards $83 a barrel by the mid-2020s.

In its monthly oil market report, the Paris-based IEA cut its oil demand forecast by 100,000 barrels per day (bpd) for this year and next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018. And the IEA expects non-OPEC countries to boost output by 1.4 million barrels a day next year, doubling this year's production growth.

"The reality is that even after some modest reductions to growth, non-OPEC production will follow this year's 700,000 bbl/day growth with 1.4m bbl/day of additional production in 2018 and next year's demand growth will struggle to match this", said the IEA.

In Abu Dhabi on Monday, the UAE Minister of Energy and Industry Suhail bin Mohammed Faraj Faris Al Mazrouei, said that oil producers were expected to unanimously extend a production cut accord later this month, but its duration was still under discussion. The IEA estimates that there will be 50 million electric vehicles on the road by 2025 and 300 million by 2040, from closer to 2 million now. Global energy demand is 30 per cent higher by 2040 - but still half as much as it would have been without efficiency improvements.

It argues that fuel efficiency and rising electrification will bring a peak in oil used for passenger vehicles, even with a doubling of the auto fleet to 2 billion vehicles by 2040.

"Over the same period, U.S. gas companies ramped up their exports to Canada and Mexico, pushing net USA imports of pipeline gas down to around 25 bcm in 2016, compared with 80 bcm some ten years earlier", IEA economists said.

"Prices ... are starting to look like a pause or pullback is needed", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

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.


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