The International Energy Agency in its latest five-year oil market report said that global oil supply could struggle to keep pace with demand after 2020, risking a sharp increase in prices, unless new projects are approved soon.
According to Oil 2017, the IEA's market analysis and forecast report, demand and supply trends point to a tight global oil market, with spare production capacity in 2022 falling to a 14-year low.
In the next few years, oil supply is growing in the United States, Canada, Brazil and elsewhere but this growth could stall by 2020 if the record two-year investment slump of 2015 and 2016 is not reversed. While investments in the US shale play are picking up strongly, early indications of global spending for 2017 are not encouraging.
Oil demand will rise in the next five years, passing the symbolic 100 mb/d threshold in 2019 and reaching about 104 mb/d by 2022. Developing countries account for all of the growth and Asia dominates, with about seven out of every 10 extra barrels consumed globally.
"We are witnessing the start of a second wave of US supply growth, and its size will depend on where prices go. But this is no time for complacency. We don't see a peak in oil demand any time soon. And unless investments globally rebound sharply, a new period of price volatility looms on the horizon," said Dr Fatih Birol, the IEA's Executive Director.
The largest contribution to new supplies will come from the United States. The IEA expects US light tight oil (LTO) production to make a strong comeback and grow by 1.4 mb/d by 2022 if prices remain around USD 60/bbl
Within OPEC, the bulk of new supplies will come from major low-cost Middle Eastern producers, namely Iraq, Iran, and the United Arab Emirates.