Don't write oil's 'obituary', IEA says in long-term demand forecast

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Opec said in the latest edition of the World Oil Outlook forecasts that oil would supply just over 27 per cent of worldwide energy needs in 2040, while natural gas will see its share at slightly more than 25 per cent.

"This is the equivalent of adding another China and India to today's global demand", the IEA said in its report.

Under its "New Policies Scenario", based on existing legislation and announced policy intentions relative to emissions and climate change, the oil price should continue to rise towards $83 a barrel by the mid-2020s. It kept its estimate for this year at 3.08 million bpd. In its World Energy Outlook 2018, the Paris-based IEA said it had cut its longer-term oil price projections from a year ago, partly because of the falling cost of both renewable and conventional sources of energy, the worldwide push to tackle climate change and improve air quality and the boom in United States shale oil and gas output. Oil demand, it says, is slowing down, but it will not be reversed before 2040, even as electric-car sales rise steeply.

The oil market should be able to find a longer-term equilibrium, with the oil price in the range of $50-70 a barrel, the agency said.

The US government said on Monday US shale production in December would rise for a 12th consecutive month, increasing by 80,000 bpd. This latest move comes as investors expect figures to show USA oil production has risen. "Although Canada has potentially prolific shale gas plays ... their estimated development cost is higher on average than in the Permian or the Appalachian Basin and they are further away from the demand hub", the IEA said.

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"Over the same period, U.S. gas companies ramped up their exports to Canada and Mexico, pushing net USA imports of pipeline gas down to around 25 bcm in 2016, compared with 80 bcm some ten years earlier", IEA economists said.

A cooling Chinese economy also stoked some concerns about demand, although so far the country's refiners are processing crude oil near record levels of 11.89 million bpd.

After an upbeat performance last week, oil prices edged lower for a second day Tuesday.

"Prices ... are starting to look like a pause or pullback is needed", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

In addition, analysts said oil prices were pressured by a global commodities selloff, led by base metals like nickel and copper, due to weaker-than-expected economic data from China. Global energy demand is 30 per cent higher by 2040 - but still half as much as it would have been without efficiency improvements.

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