The recent drop in oil industry investment brought on by weak prices threatens to significantly slow supply growth in the long term, and could lead to a shortage when it comes to meeting global demand, the International Energy Agency said in its five-year oil market forecast released Monday.
That may happen even as crude stockpiles in the U.S. and elsewhere climb over the next few years, the IEA said in its “Oil 2017” report.
“If the record two-year investment slump of 2015 and 2016 is not reversed,” supply growth may stall by 2020, it said, pointing out that global oil and gas upstream, or exploration and production, investment fell by 25% in 2015 and by another 26% in 2016.This year, it’s “evident” that under the Organization of the Petroleum Exporting Countries-led production cut agreement, output reductions are taking place just as production from the non-OPEC sector, led by the U.S., is recovering.
This ample supply, even as output cuts are implement, is the reason for the “very flat crude-oil price futures curve on which our five-year forecast is based,” the IEA said. (by Myra P. Saefong, Market Watch)