IEA warns another oil price spike likely on the horizon
Paris-based International Energy Agency (IEA) warns that oil markets will be undersupplied in less than three years unless major investments are made in the energy sector.
The IEA says global oil markets appear "comfortable" for the next three years, but supply will outstrip demand by 2022 as spare production capacity falls to a 14 year low.
Production is expected to grow the most in Canada, the US and Brazil over the next few years. OPEC members Iraq, Iran and the UAE are also expected to grow production. In contrast, supply out of Nigeria, Algeria and Venezuela will likely contract.
The agency estimates Canada will add another 800,000 bbl/day by 2023, bring total production to about 5.3 million bbl/day. Almost all of that growth will come from Alberta's oil sands. Unless significant pipeline capacity is added over the next few years, much of that added production will be forced onto rail cars, widening the heavy oil discount.
The IEA expects US light oil to rebound the fastest, adding an estimated 1.4 million bbl/day by 2022 at US$60 WTI or as much as 3 million bbl/day if oil prices get to US$80/bbl. However, if prices stay near the current US$50/bbl, supply is actually projected to contract post-2020.
Executive Director Fatih Birol says the world is "witnessing the start of a second wave of US supply growth, and its size will depend on where prices go." Birol warns peak oil demand is no where in sight and oil prices risk becoming very volatile if new projects aren't sanctioned in the next few years.