Oil price edges lower on anticipated USA production rise

Oil price edges lower on anticipated USA production rise

Oil price edges lower on anticipated USA production rise

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".

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

The IEA also today released its latest World Energy Outlook, in which it said global oil demand will fall modestly due to the rise in electric cars. "This is a continuation of the strong demand growth we are seeing in our short term oil market analysis", the report said.

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.

"With the United States accounting for 80% of the increase in global oil supply to 2025 and maintaining near-term downward pressure on prices, the world's consumers are not yet ready to say goodbye to the era of oil", the IEA report stated.

The largest disruptive force to supply will be shale production in the U.S. - the IEA estimates USA crude oil will reach peak output in the 2020s of around 17m bpd. This latest move comes as investors expect figures to show USA 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.

The Paris-based group said it cut its demand outlook for next year by 190,000 barrels a day, and global production could vault above demand by 600,000 barrels a day in the first quarter of 2018, and by 200,000 barrels a day in the second quarter. Scientists just this week said that emissions of the heat-trapping gas rose this year after three years of not growing.

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

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.

Also weighing on the oil price, is the increasing prospect of a slower pace of economic growth in China.

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.

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