IEA: Oil Investment Rising After 2-Year Lull

That could lead to another round of price volatility, the agency said.

Even with sanctions from the USA and Europe, Russia’s oil sector has grown, adding 400,000 barrels per day in the past two years, the Russian Energy minister said. According to reports, there are new doubts that Libya will be able to revive its oil production after an armed faction entered two major oil ports on Friday. The IEA expects growth in global oil demand to outstrip production growth, with demand growing 7.4 million barrels a day and output rising 5.6 million barrels a day by 2022.

The IEA’s concern, Birol said, is that production won’t keep up as upstream investment continues to decline. While electric vehicles are an important factor for oil demand, the IEA estimates they will displace only limited amounts of transportation fuel by 2022.

“In 2016, there was $450 billion investment in oil investment. There has been two years of substantial decline in investments”, Birol said.

In a reflection of the challenges the global oil market will face in the coming years, some one-third of demand growth will come from trucks in Asia.

He noted that spare production capacity was 4 percent in 2008, but it is now lower than 2 percent. India’s oil demand growth will outpace China by then, the agency says. The IEA doubled forecasts for production growth outside OPEC next year as US shale producers emerge “leaner and fitter” from the downturn.

“We need investments in all these countries if we – globally – if we avoid tightening of the market seriously in a few years of time”, he said. The jet fuel and petrochemical markets, where a good portion of demand growth will also occur, lack substitutes, too. While that has assisted companies in repairing their damaged balance sheets, several forecasters have warned in recent years that a lack of new oil finds is at risk of putting the market into a state of undersupply.