North Sea output to hit 50-year low amid slump in investment
'The latest medium-term forecast sees a comfortably supplied oil market through 2030,' said the watchdog in its closely-watched annual review of market trends.
The report notes that strong production growth is expected in a range of countries including the USA, Canada and Brazil but reckons the UK will be an exception - unless more firms commit to field developments.
The IEA warned that UK North Sea production could hit a 50-year low by 2030 'without a robust queue of new projects to be sanctioned'.
The comments could lead to the Labour Government facing increased pressure to cut the windfall tax on North Sea profits, which industry leaders say has led firms to slash investment in the area.
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However, the IEA said there remains significant uncertainty about the short-term outlook for oil and gas prices, as it highlighted factors that could result in prices rising or falling.
'With conflicts in the Middle East region at risk of intensifying and trade negotiations ongoing, uncertainties surrounding our forecasts are substantial,' said the agency.
The Wood Mackenzie energy consultancy said the fighting between Iraq and Israel had potentially wide-ranging implications for global oil and gas markets.
'The key risk of greater impacts, for both oil and gas, would emerge if Iran decided to attack shipping in the Gulf or the Strait of Hormuz,' noted the Edinburgh-based specialist.
'The impact of that on oil prices would be significant. Brent crude could move towards US$90 to US$100/bbl.'
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Brent crude sold for $75.04/bbl in afternoon trading, up $1.81/bbl on the day.
The price surged in the wake of Israel launching attacks on Iran, from around $65 per barrel in early June to $78/bbl on Monday.
Brent has given up some gains since then as traders concluded that Iran was unlikely to risk an attack on the Strait of Hormuz which separates Iran from Oman and through which millions of barrels of crude oil are shipped daily.
The crude comes from a range of countries including Saudi Arabia and Qatar as well as Iran, which may have decided that an attack on the strait could risk military intervention by the USA.
Reuters reported that two tankers collided near the strait today but there were no injuries to crew or spillage.
While an attack on the Strait of Hormuz or facilities in the region could trigger a significant rise in prices the impact may be short-lived. The price rise could lead to a reduction in demand which would weigh on the market.
The IEA cautioned: 'Heightened geopolitical risks, unresolved trade tensions, and policy shifts have added myriad uncertainties to the oil market outlook.'
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However, the agency's prediction that supplies of oil and gas will exceed demand in coming years reflects trends that it seems to think are firmly established.
Demand is expected to come under pressure with experts forecasting that global economic growth will slow in response to factors such as the tariff wars started by US president Donald Trump.
The IEA said: 'China – which has driven the growth in global oil demand for well over a decade – is set to see its consumption peak in 2027, following a surge in electric vehicle sales and the continued deployment of high-speed rail and trucks running on natural gas.'
At the same time, the IEA noted, the decision by the OPEC+ producer group to start unwinding oil production curbs in May would reset oil supply trajectories over its 2024-30 forecast period. The group is led by Saudi Arabia and includes Russia.
The IEA noted that the anticipated output increase from OPEC+ and the impact of higher tariffs on trade pushed oil prices to four-year lows in April and early May.
It said oil executives have been recalibrating their investment plans in response to the price fall.
The agency reckons the North Sea is facing a watershed as firms grapple with political and regulatory pressures.
The Labour Government increased the rate of the windfall tax in the Budget. It is conducting a review of the regulatory regime concerning field developments and has said it will not issue exploration licences covering new areas.
READ MORE: North Sea drilling curb plan looks mad amid Trump trade threats
The IEA said firms operating in the UK North Sea appeared to be focused on maximising the returns generated on existing assets rather than investing in new ones. By contrast Norway has seen more project approvals and field developments in recent years.
Production may hold steady in the UK North Sea in 2025, following years of decline. This reflects the impact of a small number of big developments sanctioned in recent years, including BP and Shell's Clair Ridge project West of Shetland.
The IEA warned that these would only be sufficient to slow the decline in production temporarily following years of weak investment.
The IEA has predicted that global oil demand will increase by 2.5 million barrels per day (mb/d) between 2024 and 2030, reaching a plateau of around 105.5 mb/d by the end of the decade. Global oil production capacity is forecast to rise by more than 5 mb/d to 114.7 mb/d by 2030.
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