Oil market’ll be close to balance in 2nd half 2016 – IEA 

15 June 2016, Sweetcrude, Lagos – The International Energy Association, IEA, says the world oil market will be close to balance in the second half of this year, and will be in balance next year.

crude oil barrels4The association said in a recently released report that energy transformation in China and subdued economic growth in advanced economies were creating headwinds against energy demand in general, adding that low fossil fuel prices have so far failed to compensate for them.

The medium-term report forecasts also indicated that global gas demand would continue to dip despite lower gas prices.

It forecasts demand to reach 3.9 trillion cubic metres, bcm, in 2021, increasing at an average annual rate of 1.5%, equivalent to an incremental 340 bcm between 2015 and 2021.

According to the report, weak demand, low prices and a sharp cutback in investments result in slower growth in global gas production over the time horizon of the report.

It noted that in the United States, production is expected to remain relatively flat across 2016 and 2017, pressured by a fall in output of associated gas and much slower growth elsewhere.

“Given the drastic fall in both oil and gas prices, stagnation in output must be looked at as a remarkable achievement and a testament to the technological and financial resilience of the US shale industry,” the report noted.

It added that large cost reductions achieved during the downturn will allow drilling activity to come back at lower prices than before. “Overall, between 2015 and 2021, US gas production is forecast to increase by more than 100 billion cubic metres (bcm), accounting for one-third of global incremental production.”

Following a stagnation in 2014, global gas demand is estimated to have returned to growth in 2015. Expansion has remained well below the historical average, however: since 2012, global gas demand has increased by just 1.0% a year, much slower than the ten-year average of 2.2%.

As the IEA warned in the Medium-Term Gas Market Report 2015, it is difficult for gas to compete in a world of very cheap coal, falling costs and continued policy support of renewables.

It added that in the United States, the extension of federal incentives for solar and the wind in 2015 will ensure their continued strong deployment over the remainder of the decade. In a development that echoes the European experience, US thermal generation is expected to decline over the forecast period as a large increase in generation from low-carbon sources outpaces modest growth in a total generation.

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