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Oil market could tip out of balance on rising non-Opec production

Oil market could tip out of balance on rising non-Opec production

The IEA, meanwhile, delivered a surprisingly downbeat outlook for oil demand in its monthly market report, showing an expected slowdown in consumption that was at odds with a more bullish view from the producer group OPEC on Monday. That means that, despite the rapid deployment of wind and solar power worldwide, global Carbon dioxide emissions will continue to rise until 2040, "far from enough to avoid the severe impacts of climate change", the IEA said. And the IEA expects non-OPEC countries to boost output by 1.4 million barrels a day next year, doubling this year's production growth.

The largest disruptive force to supply will be shale production in the United States - the IEA estimates USA crude oil will reach peak output in the 2020s of around 17m bpd.

The price of oil has risen more than 30% since June to a two-year high of around $57 a barrel in NY trading amid evidence of stronger economic growth around the world.

"The reality is that even after some modest reductions to growth, non-OPEC production will follow this year's 700,000 bbl/day growth with 1.4m bbl/day of additional production in 2018 and next year's demand growth will struggle to match this", said the IEA.

The report from the Paris-based International Energy Agency also predicts that solar power will become the cheapest source of new electricity generation and that the boom years for coal are over. But stringent fuel-efficiency measures for cars and trucks, and a shift that sees one-in-four cars being electric by 2040, mean that China is no longer the main driving force behind global oil use - demand growth is larger in India post-2025.

Despite the cautious sentiment, traders said oil prices were unlikely to fall far, largely due to supply restrictions led by the Organization of the Petroleum Exporting Countries and Russian Federation, which have helped reduce excess stockpiles. Scientists just this week said that emissions of the heat-trapping gas rose this year after three years of not growing.

Echoing the forecast by IEA, the Organisation of the Petroleum Exporting Countries said after long years of punishingly low oil prices, there is "increasing evidence" that the oil market is moving closer to reaching a healthy balance between supply and demand.

"Prices ... are starting to look like a pause or pullback is needed", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

"This is why, absent any geopolitical premium, we may not have seen a "new normal" for oil prices", the IEA said.

The International Energy Agency on Tuesday delivered a more cautious outlook for oil demand.

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