International Agency released its 2018 report on 5 March 2018.

The report is the IEA’s annual five-year forecast of global demand, supply refining, and trade covering the period between 2018 and 2023.

According to IEA’s report, “Global demand growth remains healthy driven by developing countries in Asia, even as consumption growth slows down in thanks to new environmental policies designed to curb air pollution. Strong growth in petrochemicals demand globally is another key area of growth.”

Based on an optimistic yearly economic growth rate of 3.9% in the early part of IEA’s forecast period, the report states that “Strong economies will, in turn, use more ” and they expect demand to grow at an average annual rate of 1.2 mb/d. According to the study, by 2023, demand will reach 104.7 mb/d, up 6.9 mb/d from 2017.

Another significant outcome of the report is on the driving sector of such demand rise to be the petrochemical sector. “The fastest-growing source of global demand growth are petrochemicals, particularly in the and .” says the IEA.

The so-called shale revolution led by the US continues to feed and support the petrochemicals sector as a cheap feedstock. More people in developing countries are expected to increase the demand for consumer goods and services most of which would be using this cheaper feedstock for those products like “personal care items, food preservatives, fertilisers, furnishings, paints and lubricants for automotive and industrial purposes.”

On the supply side however, the downd trend in investments has not yet been recovered. In 2015 and 2016, the upstream investments showed a 25% decline compared to previous years while 2017 showed no signs of recovery and 2018 showed only a very modest rise. In addition, the upstream (exploration and development) investments seem to be concentrated on the light tight (LTO) investments in the US meaning that the average and overall costs would be rising. Those declines resulted with an historic collapse in prices that saw benchmark crude futures fall from more than $100 a barrel in 2014 to below $30 in 2016. However the market (and the price) recovered since the 14-member cartel partnered with Russia and other producer nations decided to cut output last year.

The recent developments and trends taken all together indicate a possible stagnant supply side compared to a flourishing demand side in the coming 5 years period.

’s World Outlook 2040, published in 2017 also credited the US tight production to be dominating the global supply in the short term. The same study foresses that “Total non- liquids supply is forecast to grow from 57 mb/d in 2016 to 62 mb/d in 2022, with the US alone making up 75% of that increase. Besides the US; Brazil and Canada are the most important contributors to non- supply growth in the medium-term. and Mexico see the most pronounced decline.”

According to , “Canadian sands, Brazilian pre-salt barrels and Kazakhstan’s giant fields are noteworthy sources of supply growth beyond 2020, but these are insufficient to offset declines elsewhere. Demand for crude is projected to remain just over 33 mb/d until US tight peaks in the mid-2020s, after which demand for crude rises steadily to reach 41.4 mb/d by 2040.”

The IEA report further notes that, “the production in , Mexico and Venezuela fell by a combined 1.7 mb/d as a consequence of lower investment.” While some recovery in and Mexico could be expected, the supply side is also not promising. Venezuela is in a political cr which is adversely effecting the supply side.

The ban on exporting crude was lifted in 2015 and the US exports have already reached to 2 mb/d. However, we also have to underline that, while the US became a net exporter, it is still a net importer. Information Administration (US Department of ) data indicates that the US imported 9.9 million barrels of crude and products a day in December 2017 while it exported 7.3 million barrels of crude and products a day the same month.  While the country is still an importer, the PIRA Group estimates that “American crude exports will grow to 2.25 million barrels a day by 2020, a four-fold increase from 2016. The boom would put the U.S. in roughly the same league as major exporters including the United Arab Emirates and Kuwait.”

Overall, the market is likely to tighten by 2023 with increased risk of price volatility according to the IEA 2018 report.

These reports are strongly based on market demand and supply analyses while slightly mentioning or focusing on the geopolitical dynamics.

Given the chaotic and unstable Middle East and Africa geography which together hold the 55,2 % of the World proven reserves as well as 50,1 % of the World proven reserves, we may face a tighter supply market which means a higher price margin than expected. The EIA estimates a 82.95 dollars a barrel price for crude in 2023 as shown in the above given diagram. The ongoing proxy in and , the cr in Venezuela, the ongoing unstability in producers like Nigeria and Libya… All have a significant potential to increase the already volatile markets.

We all benefit a lot from the IEA, EIA, and similar analyses however there is a growing need for a much more detailed Outlook focusing much deeper on the geopolitical dimension of the markets.