Crude oil at $60/bbl not the 'new normal' - IEA

Crude oil at $60/bbl not the 'new normal' - IEA

Crude oil at $60/bbl not the 'new normal' - IEA

"Using a scenario whereby current levels of Opec [Organisation of the Petroleum Exporting Countries] production are maintained, the oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 0.6m bpd followed by another, smaller, surplus of 0.2m bpd in 2Q18".

Unless OPEC agrees to cut more production, output from non-member states will leave the market in surplus and limit the rally in oil prices, the IEA said.

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.

Oil-dependent Venezuela's crude output dipped last month below 2 million barrels per day, its lowest level in almost three decades, global producer group Opec said on Monday.

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The report from the Paris-based International Energy Agency also predicts that solar power will become the cheapest source of new electricity generation and that the boom years for coal are over. "Meeting this demand would require an overall investment of around $10.5 trillion across upstream, midstream and downstream operations" Opec Secretary-General, Mohammad Barkindo, said noting that the 2017 outlook was more positive than a year ago, partly thanks to oil exporting nations' efforts to stabilise the market.

The U.S. government said on Monday U.S. shale production in December would rise for a 12th consecutive month, increasing by 80,000 bpd.

Indeed, the IEA also suggests that demand for oil will remain supported by lower prices, going forward.

After an upbeat performance last week, oil prices edged lower for a second day Tuesday.

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Worldwide, oil consumption is seen reaching 97.7 million bpd in 2017, up 1.5 million bpd from 2016.

Brent crude oil prices recently climbed to two-year highs of more than $60 a barrel due to supply disruptions, geopolitical concerns and a growing expectation that an Opec-led agreement to reduce production will be extended through 2018. However, this is expected to cut only 2.5 million barrels per day, or about 2%, off global oil demand by that time.

Christopher Kuplen, BofAML's Research Analyst, argues that since 55 per cent of global oil is consumed in transportation, of which more than half by passenger vehicles, the demand for oil would eventually fall.

"Next year's demand growth will struggle to match this", the IEA said.

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Overall global energy needs are seen rising more slowly than in the past, but are still projected to expand by 30 per cent between today and 2040.

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