Oil prices to return to US$80/bbl within the next decade, predicts the US EIA

EIAreport2016Oil prices are expected to return to the range of US$80/bbl within the next decade, predicts the US Energy Information Administration (EIA) in its recently-released International Energy Outlook 2016 (IEO2016), with investment likely to continue slowing to a point at which producers will be unable to respond quickly to future growth in demand for liquids

“If supply growth slows as a result of underinvestment, a sustained period of higher prices may be required to induce additional capital back into the market,” says the EIA.

Worldwide consumption of petroleum and other liquid fuels is forecast to increase from 90mn barrels per day (bpd) in 2012 to 100mn bpd in 2020 and 121mn bpd in 2040, according to the EIA report. The non-OECD economies of Asia, the Middle East and Africa will lead the growth in oil consumption to 2040, spurred by strong economic growth and rising populations.

Crude oil and lease condensate supplies from OPEC and non-OPEC sources are forecast to increase by 23mn bpd in the IEO2016 Reference case, from 76mn bpd in 2012 to 100mn bpd in 2040. OPEC countries are forecast to account for 42 to 47 per cent of total crude and lease condensate production worldwide over the course of the projection period. Middle East OPEC member countries are forecast to increase their production by 12mn bpd. 

Iran has the potential to add almost two million bpd of crude oil, condensate, and natural gas plant liquids to the global market over the next five years, says the EIA, although the country’s ability to increase its crude oil sales may be limited by global demand and the availability of buyers. Actual production growth after 2017 will depend on Iran’s ability to attract foreign investment that will provide access to better technology, a higher level of expertise, and more financing opportunities. However the possibility of the “snap back” of sanctions if Iran strays from its commitments, which could potentially lead to sanctions being reinstated, adds a downside risk to Iran’s production outlook.

Worldwide natural gas consumption is projected to increase from 120 trillion Tcf in 2012 to 203 Tcf in 2040 in the IEO2016 Reference case. By energy source, natural gas will account for the largest increase in world primary energy consumption and will be the fastest-growing fossil fuel.

To meet the projected rising natural gas demand projected, the world’s natural gas producers are forecast to increase supplies by nearly 69 per cent from 2012 to 2040. With more than 40 per cent of the world’s proved natural gas reserves, the Middle East will account for 20 per cent of the total increase in world natural gas production, from 19.2 Tcf in 2012 to 35.8 Tcf in 2040. The strongest growth among Middle East producers from 2012 to 2040 will come from Iran, where natural gas production is forecast to increases by 6.8 Tcf, followed by Saudi Arabia (3.4 Tcf of new production) and Qatar (2.9 Tcf). Although Iraq will be the region’s fastest-growing supplier of natural gas, with average increases of 15 per cent a year over the projection period, it will remain a relatively minor contributor to regional natural gas supplies.

According to the EIA, renewables will be the world's fastest-growing energy source over the projection period, followed by nuclear power. However, fossil fuels will still account for 78 per cent of energy use in 2040.


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