The International Energy Agency said on Monday that the oil market will begin rebalancing in 2017, but after that efficiency gains will push a robust increase in U.S. oil production by 2021.
“Only in 2017 will we finally see oil supply and demand aligned but the enormous stocks being accumulated will act as a dampener on the pace of recovery in oil prices,” the Paris-based adviser to 29 countries said in its medium-term report Monday. “It is hard to see oil prices recovering significantly in the short term from the low levels prevailing.”
IEA forecasts that global oil supply will grow by 4.1 million barrels a day between 2015 and 2021, much lower than the total growth of 11 million barrels a day in the period of 2009 to 2015. Meanwhile the agency increased the estimates for global oil demand, saying it will reach 101.6 million barrels a day by 2021.
Although IEA sees oil market rebalancing in 2017, it is still not optimistic in the future, saying that America would becoming the biggest source of new supply by 2021.
"Light, tight oil output declines by 600,000 barrels this year and by a further 200,000 in 2017 before a gradual recovery in oil prices, combined with further improvements in operational efficiencies and cost cutting, allows production to resume its upward climb," the IEA predicted.
The IEA said that after U.S. drillers lower costs and improve efficiency, the total U.S. liquids output will increase by 1.3 million barrels a day by 2021.
“Anybody who believes that we have seen the last of rising LTO production in the United States should think again,” the IEA said.
“It is very tempting, but also very dangerous, to declare that we are in a new era of lower oil prices,” the agency said. “The risk of a sharp oil price rise towards the later part of our forecast arising from insufficient investment is as potentially destabilizing as the sharp oil price fall has proved to be.”