IEA Chief Expects Oil Glut to Ease in 2017

IEA Chief Expects Oil Glut to Ease in 2017IEA Chief Expects Oil Glut to Ease in 2017

The International Energy Agency expects oil markets to reach a balance between supply and demand in 2017, as the current oil glut slowly eases, IEA chief Fatih Birol said during meetings in South Korea.

"Oversupply of oil markets will gradually be eased and (oil markets) will find a balance between supply and demand in 2017," Birol was quoted as saying by Reuters.

The IEA forecast in its August report that oil markets will slowly tighten in the second half of 2016, as global demand growth declines and non-OPEC supplies rebound.

In a separate interview with Reuters after the statement was released, Birol said he saw two drivers for the rebalancing of the oil market.

The first is a drop in production from countries outside of the Organization of Petroleum Exporting Countries of about 900,000 barrels per day, especially in the US in 2016. The second is "demand that is growing in a healthy way" and that the IEA expects to climb by 1.4 million bpd this year.

"We may be on a higher side compared to others (forecasts); this is mainly because we're more upbeat when it comes to Europe and emerging Asia demand in demand growth," he said.

In the statement, the IEA chief also said there is concern that a decline in upstream oil and gas investments because of the prolonged low oil prices could increase oil price volatility.

The statement added that Birol believes the start of the new climate regime after Paris would spur research and development investments on clean energy technology, with fast growth expected from the solar, wind power and electric car sectors.

He noted that solar energy costs have dropped by 80% over the last five years and wind power costs have declined by 35%, which means more countries can afford them.

"Several years ago, renewables were considered to be a romantic story but now it's becoming a business," he said.