Low investment in oil exploration could lead to a “tightening in supply”, the International Energy Agency (IEA) has warned.
Global oil discoveries fell to a record low last year and the number of new oil projects approved has fallen to its lowest level in 70 years, it said. The intergovernmental organisation predicted exploratory spending would fall for the third consecutive year in 2017 to less than half of 2014 levels.
Meanwhile, global demand for oil will increase by 1.2m barrels a day over the next five years, causing a squeeze on supplies, it predicted.
The offshore sector has been particularly hard hit by the industry slowdown, the IEA said. Only 13% of conventional resources sanctioned in 2016 were offshore, compared with an average of more than 40% between 2000 and 2015.
The only exception is the US shale gas industry. “Every new piece of evidence points to a two-speed oil market, with new activity at a historic low on the conventional side contrasted by remarkable growth in US shale production,” said Dr Fatih Birol, IEA executive director.
“The key question for the future of the oil market is for how long can a surge in US shale supplies make up for the slow pace of growth elsewhere in the oil sector.”
But the IEA’s warning of increased demand contradicts a BP forecast earlier this year. BP’s Energy Outlook, released in January, predicted a slowing rate of demand growth would be met by an “abundance” of resources, benefiting low cost producers.
Spencer Dale, BP’s group chief economist, said: “The impact of electric cars, together with other aspects of the mobility revolution, such as self-driving cars, car sharing and ride pooling, is one of the key uncertainties surrounding the long-term outlook for oil.”
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