Oil prices fell 2 percent on Tuesday, headed for a third straight daily decline, on forecasts for rising USA crude output and a gloomier outlook for global demand growth in a report from the International Energy Agency (IEA).
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. Indeed, the IEA also suggests that demand for oil will remain supported by lower prices, going forward.
Fitch Ratings said in its 2018 oil outlook that it assumed 2018 "average oil prices will be broadly unchanged year-on-year and that the recent price recovery with Brent exceeding $60 per barrel may not be sustained".
"The recent price support, namely the tension in the Middle East, has been swept aside as rising rig counts and USA shale output (are) in the focus of traders", PVM Oil Associates analyst Tamas Varga said.
Unless OPEC agrees to cut more production, output from non-member states will leave the market in surplus and limit the rally in oil prices, the IEA said. The Organization of the Petroleum Exporting Countries' latest monthly data showed Venezuela reporting production of 1.955 million bpd in October, versus 2.085 million in September.
After hitting a 10-year low of less than $30 in January, down from a peak of more than $100 in mid-2014, oil prices have recently been hovering around the $55 mark.
Oil prices have risen in recent months, after both Opec and non-Opec countries struck a landmark deal at the end of past year to cut back production to combat a global oil glut. The IEA estimates that there will be 50 million electric vehicles on the road by 2025 and 300 million by 2040, from closer to 2 million now. 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. Scientists just this week said that emissions of the heat-trapping gas rose this year after three years of not growing.
Add to that China's increasing stockpiling for internal use and demand for oil could slow more than expected.
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.
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.
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".