Oil Falls Sharply on Rising US Output, Global Demand Concern

IEA cuts oil demand forecast

U.S. West Texas Intermediate (WTI) crude was at $56.72 per barrel, down 4 cents.The dips came after both crude benchmarks early last week hit highs last seen in 2015, but traders said the market had lost some momentum since then."Oil is fairly calm".

Recent gains in crude oil values, which have put prices at plus $60/bbl, may not last if the factors driving price rises - namely, geopolitical tensions in the Middle East - prove to be temporary, the International Energy Agency (IEA) said on Tuesday.

"I think this group of committed and responsible producers came together. and I think they will continue to do what it takes to take us to the next level", he said at an worldwide oil conference. That means that, despite the rapid deployment of wind and solar power worldwide, global Carbon dioxide emissions will continue to rise until 2040, "far from enough to avoid the severe impacts of climate change", the IEA said.

This sentiment comes in part on the back of rising U.S. oil output, which has grown by more than 14 percent since mid-2016 to a record 9.62 million barrels per day (bpd).

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

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

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.

Sergio Aguero hospitalised following Argentina's 4-2 loss to Nigeria
Nigeria's Brown Ideye (L) celebrates after scoring the team's third goal during an worldwide friendly football match between Argentina and Nigeria in Krasnodar on November 14, 2017.

The U.S. shale surge could also mean an era of lower-for-longer oil prices. This latest move comes as investors expect figures to show United States oil production has risen. 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.

According to the IEA, China overtakes the United States as the largest oil consumer around 2030, and its net imports reach 13 million barrels per day in 2040.

The global energy markets are in the midst of "extraordinary times", writes Fatih Birol, executive director at the International Energy Agency in its annual World Energy Outlook, launched in Paris on Tuesday.

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.

Some analysts even predict that with oil demand declining as EVs set to replace conventional fuel vehicles, oil price could plunge to as low as $10 a barrel over the next six to eight years.

Global energy needs will rise more slowly than in the past but still expand by 30 per cent between today and 2040, the equivalent of adding another China and India.

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