LONDON, Nov 14 (Reuters): Global oil demand will fall only modestly alongside the expected rise in electric vehicles over the next two decades, with consumption in petrochemicals and other transportation still growing, the International Energy Agency said on Tuesday.
Oil is already facing stiff competition from ever-cheaper and more environmentally friendly energy sources as traditional fossil fuel users switch to cleaner, low-carbon alternatives.
In its World Energy Outlook 2018, the Paris-based IEA said it had cut its longer-term oil price projections from last year, partly because of the falling cost of both renewable and conventional sources of energy, the worldwide push to tackle climate change and improve air quality and the boom in US shale oil and gas output.
Under the IEA's "New Policies Scenario", based on existing legislation and announced policy intentions relative to emissions and climate change, the oil price should continue to rise towards $83 a barrel by the mid-2020s.
The oil market should be able to find a longer-term equilibirum, with the oil price in a range of $50-70 a barrel, the agency said.
The IEA estimates that there will be 50 million electric vehicles on the road by 2025 and 300 million by 2040, from closer to 2.0 million now. However, this is expected to cut only 2.5 million barrels per day (bpd), or about 2.0 per cent, off global oil demand by that time.
Another report adds: Oil prices eased for a third day on Tuesday as traders and investors questioned how much the prospect of further rises in US output might overshadow some of the optimism that OPEC-led production cuts would tighten the balance between crude supply and demand.
Brent crude futures LCOc1 were last down 34 cents on the day at $62.82 a barrel at 1212 GMT, while US West Texas Intermediate (WTI) futures CLc1 fell 27 cents to $56.49.
Both benchmarks early in the previous week hit highs last seen in 2015, but traders said the market had lost some momentum since then.
Traders said they were cautious about betting on further price rises.
"Prices ... are starting to look like a pause or pullback is needed," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
This sentiment comes in part on the back of rising US oil output C-OUT-T-EIA, which has grown by more than 14 per cent since mid-2016 to a record 9.62 million barrels per day (bpd).
The US government said on Monday US shale production in December would rise for a 12th consecutive month, increasing by 80,000 bpd.
"The recent price support, namely the tension in the Middle East has been swept aside as rising rig counts and US shale output (are) in the focus of traders," PVM Oil Associates analyst Tamas Varga said.
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".
So far in 2017, Brent has averaged $54.5 per barrel.
Despite the cautious sentiment, traders said oil prices were unlikely to fall far, largely due to supply restrictions led by the Organisation of the Petroleum Exporting Countries and Russia, which have helped reduce excess stockpiles.
The International Energy Agency on Tuesday delivered a more cautious outlook for oil demand.
In a monthly report, the Paris-based agency cut its oil demand forecast by 100,000 bpd for this year and next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018.
The IEA said warmer temperatures could cut consumption, while sharply rising production from outside OPEC might mean the global market tilts back into surplus in the first half of 2018.
"You cannot have the same forecast at $60 as you have at $40. You need to address that and the IEA is starting to make that adjustment," Petromatrix strategist Olivier Jakob said.
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