Oil price drops more than US$1on IEA warning of shrinking demand

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The IEA added that the likely boom in U.S. production will place it among the top fossil fuel producers in the world, by 2025.

The International Energy Agency on the other hand is saying that global oil demand growth is likely to increase more slowly over the coming months, doubling down on their previous underestimation demand, because of their prediction that warmer temperatures will cut consumption, which may tilt the market back into surplus in the first half of next year.

That will keep prices down and help make the U.S. a net exporter of oil - in addition to gas - by the late 2020s. US crude was also off 1.1%, to $56.15.

Nevertheless, U.S. shale output is expected to decline from the middle of the next decade, and with investment cuts taking their toll on other new supplies, the world will become increasingly reliant once again on OPEC, according to the report.

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American shale producers have been forced to endure a collapse that sent crude prices from $100 a barrel in 2014 to a low of $26 in 2016.

But the price crash had another effect: it forced a wave of innovation that has improved shale producers' productivity and efficiency.

"It is far too early to write the obituary of oil, as growth for trucks, aviation, petrochemicals, shipping and aviation keep pushing demand higher", said Fatih Birol, executive director of the Paris-based IEA. This latest move comes as investors expect figures to show U.S. oil production has risen.

The largest contribution to demand growth - nearly 30 per cent - would come from India, whose share of global energy would rise to 11 per cent by 2040, it said.

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The forecasts are also underpinned by some major assumptions: The report assumes that governments stick to promises they've made on energy, including pledges by India and China to move away from fossil fuels. "There's big growth coming from shale oil, and as such there'll be a big difference between the US and other producers". If the standards stay at today's levels, the USA would remain a net oil importer in 2040.

USA shale exploration and production companies weathered a global, two-year industry glut by tightening belts, cutting costs and adopting novel technological advances aimed at increasing production and lowering break-even costs.

More details from the World Energy Outlook are available at the IEA website.

Oil demand is now projected to rise by 1.5 mb/d in 2017 and by 1.3 mb/d in 2018, representing annual increases of 1.6 percent and 1.3 percent, respectively.

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