The oil market will remain oversupplied until the end of the decade as the push for cleaner fuels and greater efficiency offsets the effect of lower prices, the world’s leading energy forecaster said.
In its annual outlook, the International Energy Agency said oil demand would rise by less than 1 percent a year between now and 2020, slower than necessary to quickly mop up an oil glut that has driven prices to multiyear lows. The slowdown in oil demand growth follows a near 15-year surge in consumption, driven by the rapid industrialization of China and other emerging market economies. But Beijing is now moving away from dirtier fuels and to less energy-intensive growth as it heads toward a more consumer-led economy.
“We are approaching the end of the single largest demand growth story in energy history,” Fatih Birol, executive director of the IEA, told the Financial Times.“Demand is not as strong as we have seen in the past as a result of efficiency [and climate] policies [globally],” he added, saying the growth in renewables will further restrict demand for oil.
The IEA does not expect oil to reach $80 a barrel until 2020 under its “central scenario,” as excess supplies are slowly soaked up. After 2020, oil demand growth is expected to grind almost to a halt, increasing just 5 percent over the next 20 years, the IEA said. In its “low oil price” scenario, the agency said prices would stay close to $50 a barrel until the end of the decade.