Markets

Don't write oil's 'obituary', IEA says in long-term demand forecast

Don't write oil's 'obituary', IEA says in long-term demand forecast

Oil fell by more than $1 in morning trading in NY after the International Energy Agency reported that recent increases in the oil price and milder-than-normal weather had dampened demand growth.

The publication argued that the shale oil and gas revolution in the USA continues and that, by the the mid-2020s, the U.S. is projected to become the world's largest liquefied natural gas exporter and a net oil exporter by the end of that decade. That "will bring a lot of dollars to US business".

It's a revolution powered by one factor above all others: shale.

The International Energy Agency on the other hand is saying that global oil demand growth is likely to increase more slowly over the coming months, doubling down on their previous underestimation demand, because of their prediction that warmer temperatures will cut consumption, which may tilt the market back into surplus in the first half of next year.

"A remarkable ability to unlock new resources cost-effectively pushes combined United States oil and gas output to a level 50% higher than any other country has ever managed", the IEA said on Tuesday.

American shale producers have been forced to endure a collapse that sent crude prices from $100 a barrel in 2014 to a low of $26 in 2016.

"Many commentators say we are writing the obituary for oil demand.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".

NASA launching JPSS-1 weather satellite
The satellite, which measures 14.8 feet (4.5 meters) long and weighs 5,060 pounds (2,295 kilograms), won't be alone. The launch is planned for Wednesday, Nov. 15, from Space Launch Complex-2 at Vandenberg Air Force Base, California.

The price for Brent crude oil, the global benchmark, was near $63 per barrel early Tuesday, up more than 30 percent since the end of June. This latest move comes as investors expect figures to show United States oil production has risen.

That will benefit the U.S.as it turns from imports to exports.

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.

In the US, the report assumes that improvements in fuel economy standards for cars and trucks will help reduce demand for oil. "There's big growth coming from shale oil, and as such there'll be a big difference between the USA and other producers".

If the assumptions do hold, the USA will find itself in a very rare position.

More details from the World Energy Outlook are available at the IEA website.

"Yet this is precisely what is happening as a result of the USA shale revolution - both for oil and for natural gas", the IEA said.


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