Oil steady, tempered by caution over rising United States output

Crude oil is extracted from the Monterey Shale formation near Bakersfield California

The Paris-based group said it cut its demand outlook for next year by 190,000 barrels a day, and global production could vault above demand by 600,000 barrels a day in the first quarter of 2018, and by 200,000 barrels a day in the second quarter.

"Using a scenario whereby current levels of Opec [Organisation of the Petroleum Exporting Countries] production are maintained, the oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 0.6m bpd followed by another, smaller, surplus of 0.2m bpd in 2Q18".

Reducing the use of fossil fuels is a key demand from activists and many governments taking part in the global climate talks in Bonn, Germany, this week.

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.

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.

"A remarkable ability to unlock new resources cost-effectively pushes combined United States oil and gas output to a level 50% higher than any other country has ever managed; already a net exporter of gas, the USA becomes a net exporter of oil in the late 2020s", the IEA said in its 2017 world energy report.

The U.S. shale surge could also mean an era of lower-for-longer oil prices. However, this is expected to cut only 2.5 million barrels per day (bpd), or about two per cent, off global oil demand by that time.

If planned pipeline projects come to fruition, the United States and Canada combined could export more than 700,000 bpd to China by 2040 - a drop in the barrel in the country's 15.5 million bpd demand.

However, even rapid growth in the electric vehicle fleet would be unlikely to have a substantial impact on oil consumption for passenger transport until the mid-2020s, it said.

"Next year's demand growth will struggle to match this", the IEA said.

Between 2017 and 2040 the IEA estimates that more solar power capacity will be added globally each year than any other source of energy, with an annual average increase of almost 70 gigawatts.

With big gains forecast in its output of shale oil, the United States is expected to become a net oil exporter by the mid-2020s, the IEA said, adding that the USA will account for 80 per cent of the increase in the global oil supply to 2025, which will maintain near-term downward pressure on prices.

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