Global Energy Supply: IEA Forecasts 73% Drop In Fossil Fuels’ Share

The International Energy Agency (IEA) has projected that fossil fuels’ share in global energy supply would drop to 73% by 2030 and carbon dioxide emissions peaking by 2025. This is despite the fact that global oil demand would peak this decade at about 102 million barrels per day (mbd) for two more decades. The agency, in its latest ‘World Energy Outlook (WOE) 2023’ report stated that the drop in fossil fuel share in the global energy market had remained at around 80% for decades. According to the IEA’s Stated Policies Scenario (STEPS) data, from 2030, oil consumption will begin a slow decline by decreasing by more than four million barrels per day to 97.4mbd in 2050, the IEA said.  The report further predicted that in 2030, clean technologies would play a “greater role than today” as electric cars on the road worldwide will increase by 10 times, and renewables’ share of the global electricity mix will be near 50%, up by 30% while heat pumps and other electric heating systems will outsell fossil fuel boilers globally, and investment into new offshore wind projects will be three times more than new coal and gas-fired power plants. Commenting on the report’s findings, Global Net-Zero Transformation Advisory Operations Manager, EcoAct, Lindsay Ventress, said: “The World Energy Outlook 2023 underscores the increasingly narrow path toward preserving the goal of 1.5°C warming, yet provides hope that this remains attainable if we promptly embark on transformative climate actions. “The report’s call for an annual twofold increase in energy efficiency improvements underscores its critical role in a sustainable future, but also the current failure of legislators to get to grips with this vital requirement. In light of this, businesses cannot afford to merely wait for government commitments; they must become catalysts for progress,” she added. Even so, the IEA maintained that demand for fossil fuels was set to remain “far too high” to limit the global rise in temperatures to 1.5°C, as per the Paris Agreement. The agency further warned that despite the impressive growth in clean energy, if the policies are not changed, global emissions would remain high to push the temperature limit by around 2.4°C this century. The STEPS also estimates a peak in energy-related carbon dioxide emissions in the mid-2020s. Speaking on the report’s findings, the IEA Executive Director, Fatih Birol, explained: “Taking into account the ongoing strains and volatility in traditional energy markets today, claims that oil and gas represent safe or secure choices for the world’s energy and climate future look weaker than ever.” According to the report, the tense situation in the Middle East “is a reminder of hazards in oil markets a year after Russia cut gas supplies to Europe”. In the STEPS, the share of seaborne crude oil trade from the Middle East to Asia rises from around 40 per cent to 50 per cent by 2050. The WOE highlights the fears in the natural gas markets due to instability and price hikes after Russia cut supplies to Europe while also foreseeing a surge in new liquefied natural gas (LNG) projects from 2025, with the prospect of adding more than 250 billion cubic metres per year new capacity by 2030, representing 45% of the current global LNG supply. While some of the immediate pressures of the global energy crisis have eased due to the current geopolitical situation and the global economic developments, the IEA drew attention to the “unsettled” global energy market, noting that “this underscores, once again, the frailties of the fossil fuel age and the benefits for energy security as well as for emissions of shifting to a more sustainable energy system.” It stated that developing economies had been experiencing the largest increase in demand for energy services as the extreme volatility in energy markets have pushed for an “affordable, reliable, and resilient supply”.

Exxon Eyes $16bn Profits By 2027

Exxon is aiming to achieve $16 billion in profits by 2027, primarily driven by its fuels and chemicals sectors. The company anticipates a prolonged plateau in gasoline demand towards the end of the decade. Exxon’s profit forecast follows the merger of its refining and chemicals divisions, a strategic move designed to optimize returns and enhance operational efficiency. As part of its growth strategy, Exxon recently commenced operations at two new chemicals units within its Baytown, Texas, refinery, with a total investment cost of $2 billion. These additions align with Exxon’s long-term expansion plans, aiming to provide essential high-value materials for various everyday products, as highlighted by Karen McKee, president of the company’s Product Solutions division. Exxon’s commitment to safety and substantial investments in the U.S. Gulf Coast have contributed to its ability to execute large projects effectively. In addition to the recent Baytown expansion, Exxon also augmented its Beaumont, Texas, refinery earlier this year, boosting its daily processing capacity by 250,000 barrels. The petrochemical sector is emerging as a prominent avenue for sustained growth within the oil and gas industry. This shift is partly due to the ongoing energy transition, which is expected to reduce the demand for oil as a transport fuel. The International Energy Agency predicts that oil demand will peak before 2030, driven by the increasing adoption of electric vehicles (EVs). However, OPEC disputes these projections, cautioning that such forecasts could undermine global energy security by deterring investments in oil and gas production. Gasoline demand in the United States has already reached its zenith, occurring in 2018 at 9.33 million barrels per day. The most recent data, from June this year, indicates a demand of 9.27 million barrels per day. Exxon’s strategic focus on fuels and chemicals, coupled with prudent investments, positions the company to thrive in a changing energy landscape.

Production Cut Pushes Oil Prices To $94.74

Oil prices continued to climb in early trading on Monday as WTI rose to $91.60 while Brent traded at $94.74. Falling crude inventories and the continuation of the Organisation of Petroleum Exporting Countries (OPEC)+ cuts have sparked an oil price rally that is showing no signs of slowing. Analysts say prices hit the $100 marks. China’s latest stimulus measures have only added to bullish sentiment, with hopes rising that the Asian giant is set to get its economy back on track. Oil prices rose in early Asian trade on Monday, extending last week’s gains amid expectations of an increasingly tighter market and hopes that China’s latest stimulus measures would revitalize the economy.  WTI Crude prices were trading above $91 per barrel in early Asian trade on Monday, at $91.50, up by 0.85%. The international benchmark, Brent Crude, was above the $94 a barrel mark and traded 0.69% higher at $94.57. Falling global inventories amid a tightening market with the OPEC+ and Saudi production cuts have supported oil prices in recent weeks. One of China’s latest policy moves to jumpstart the economy has also made market participants and analysts more bullish on oil. Last week, China cut the reserve ratio for banks for a second time this year in a move to increase liquidity in the system. “China’s stimulus policy, resilient US economic data, and OPEC+’s ongoing output cuts are the bullish factors that support the oil market’s upside movement,” Tina Teng, a market analyst at CMC Markets, wrote in a note. Senior market analyst at OANDA, Ed Moya, said that “After a third week of gains, crude prices are not seeing the typical profit-taking as the short-term crude demand outlook gets a boost from improving US and Chinese economic data. “The oil market is going to stay tight a while longer, but we might need to see a fresh catalyst to send oil to triple digits,” Moya added.

Supply Shortfall To Drive Oil Market Volatility By Q4 –IEA

The International Energy Agency (IEA) has said oil prices are heading for a surge in volatility amid an expected “significant supply shortfall” on the market in the fourth quarter of 2023. This, the Agency, says is due to the Saudi-led cuts to OPEC+ oil supply. So far this year, higher crude oil production from countries outside the OPEC+ alliance has managed to offset part of the OPEC+ cuts. “But from September onwards, the loss of OPEC+ production, led by Saudi Arabia, will drive a significant supply shortfall through the fourth quarter,” the IEA said in its closely-watched Oil-Market Report for September. Last week, Saudi Arabia and Russia extended their production and export cuts of 1 million barrels per day (bpd) and 300,000 bpd, respectively, until the end of 2023, pushing Brent Crude prices to above $90 per barrel and the highest level in 10 months. Oil prices traded in relative calm during August, with volatility at multi-year lows, the IEA said but however, a calm August was followed by the announcements of extensions of the supply cuts in early September, which sent prices and volatility higher. Volatility could further increase through the end of this year, according to the Agency. If the two OPEC+ leaders unwind the cuts in early 2024, the market would shift to a surplus, the IEA said, but noted that oil stocks would still be at uncomfortably low levels. This increases “the risk of another surge in volatility that would be in the interest of neither producers nor consumers, given the fragile economic environment,” the Paris-based agency added. “The Saudi-Russian alliance is proving a formidable challenge for oil markets,” it said, commenting on the move higher in oil prices and on its previous warnings about an already tightening oil market. In August, observed global inventories plunged by a massive 76.3 million barrels, or by 2.46 million bpd, per the IEA estimates.

Oil price to hit $100, analysts forecast

As Brent crude oil price continued to rise and trading on Wednesday around $90 a barrel for the second straight day, and now up 25 per cent since June due to the prospect of more production cuts by leading oil exporters, analysts have predicted the price may hit $100 a barrel. The surge is sending ripples through the global stock and bond markets and the prospect of higher prices at the pump and throughout manufacturing may spur diplomatic efforts to increase supply and tamp down any inflationary effects on the global economy. The two countries behind the price hike Saudi Arabia and Russia said on Tuesday that they would extend their oil production cuts equivalent to a combined 1.3 million barrels a day through year-end. The duration of the cuts surprised market watchers, as did Saudi Arabia’s hint that it may make even deeper cuts in the coming months. Nadia Martin Wiggen, a commodities analyst at Pareto Securities, told Bloomberg that Brent could hit $100 a barrel, a level it frequently surpassed in the first months following Russia’s invasion of Ukraine. China’s sputtering economy could sap demand for oil, keeping prices down and Saudi Arabia has little interest in seeing triple digit crude prices crash the global economy, Jorge León, an economist for the research firm Rystad Energy, told DealBook. “Higher oil prices will only increase the likelihood of more fiscal tightening, especially in the U.S., to curtail inflation,” León said. Investors have sold off government bonds, including 10-year Treasury bills, over the past two days on fears that central banks will be forced to stay hawkish on interest rates to blunt the inflationary effect of higher energy prices. Means, Iran’s oil exports have surged since Saudi Arabia began cutting its production this summer, and Bloomberg reported last week that Tehran and Washington have held back-channel talks to keep crude flowing to make up for supply reductions elsewhere. Venezuela, another exporter under sanctions, has reportedly turned to Beijing to help it revive production. In the US the Biden administration, “the only thing they can pretty much do to counteract Saudi cuts is to bring more oil into the market from other countries,” León said. “Iran and Venezuela are the best candidates,” he added, even if it’s politically unpalatable to fully reopen talks with them. The United States may have few other options as domestic producers of oil from shale won’t fill the void in the short term and Washington is unlikely to tap the nation’s strategic petroleum reserve, after doing so last year brought it down to levels last seen in the 1980s, León said.