IEA Projects $80 Oil By 2020

• The IEA’s newest projections call for $80/bbl oil by 2020.
• The agency projects that emerging markets will drive global oil demand to 103.5 million bpd by 2040.
• The IEA projects that oil investment cuts will spill over into 2016.

The International Energy Agency (IEA) released its brand new World Energy Outlook on Tuesday. The report includes the IEA’s most up-to-date oil demand, production and pricing estimates in what has been an extremely volatile and unpredictable global commodities market.

The numbers
In its base case, the IEA is predicting that oil prices will rebound to $80/bbl by 2020. The agency is projecting that global demand growth will rise by about 900,000 barrels per day through 2020 and reach 103.5 million bpd by 2040.

The IEA’s oil price projections are in line with OPEC’s recent $80/bbl price projections through 2020.

Investment cuts
In terms of the huge glut that caused the price of oil to fall by more than 50 percent from peak levels, the IEA sees huge investment cuts in the oil industry. The IEA is forecasting a 20 percent cut in global oil investments this year, but it is also calling for the decline in investments to carry over into 2016.

“In the last 25 years, we have never seen two consecutive years where the investments are declining, and this may well have implications for the oil market in the years to come,” the report reads.

Emerging markets drive demand
The IEA is projecting that China’s energy consumption will double that of the United States by 2040. However, increasing efficiency means that China will need 85 percent less energy per unit of future economic growth than it required over the past 25 years.

The IEA projects that India, not China, will be the biggest driver of global oil demand growth in coming years. The agency predicts 10 million bpd of demand from Indian by 2040.

Shares of the United States Oil Fund LP (ETF) USO are down 52.4 percent in the past year.

Disclosure: the author holds no position in the stocks mentioned.