The International Energy Agency said the oil industry's hopes for a higher, stable crude prices trading between $50 to $60 a barrel could be dashed soon if the supply disruptions and geopolitical tensions pushing prices upward prove temporary.
The IEA also today released its latest World Energy Outlook, in which it said global oil demand will fall modestly due to the rise in electric cars.
Oil-dependent Venezuela's crude output dipped last month below 2 million barrels per day, its lowest level in almost three decades, global producer group Opec said on Monday. The effort, which started in January, is credited with pulling the price of oil back from the sub-$30 per barrel range last year to two-year highs in recent sessions.
"This is why, absent any geopolitical premium, we may not have seen a "new normal" for oil prices", the IEA said. In its World Energy Outlook 2018, the Paris-based IEA said it had cut its longer-term oil price projections from previous year, 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 USA shale oil and gas output.
The largest disruptive force to supply will be shale production in the USA - the IEA estimates United States crude oil will reach peak output in the 2020s of around 17m bpd. "Meeting this demand would require an overall investment of around $10.5 trillion across upstream, midstream and downstream operations" Opec Secretary-General, Mohammad Barkindo, said noting that the 2017 outlook was more positive than past year, partly thanks to oil exporting nations' efforts to stabilise the market. This latest move comes as investors expect figures to show United States oil production has risen.
"Many commentators say we are writing the obituary for oil demand".
After an upbeat performance last week, oil prices edged lower for a second day Tuesday.
The IEA estimates that there will be 50 million electric vehicles (EVs) on the road by 2025 and 300 million by 2040, from closer to 2 million now. The figure was even lower based on secondary sources rather than what the government reports, at 1.863 million bpd in October, according to Opec.
"Next year's demand growth will struggle to match this", the IEA said.
A study by Bank of America Merrill Lynch forecasts that pure electric vehicles would achieve a global penetration of 12 per cent in 2025, 34 per cent by 2030 and 90 per cent by 2050.
Also weighing on the oil price, is the increasing prospect of a slower pace of economic growth in China.
Having said that, the IEA points out that over the next 25 years, the world's growing energy needs will be met first by renewables and natural gas "as fast-declining costs turn solar power into the cheapest source of new energy electricity generation".