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Current upstream spending trends indicate that oil prices will likely remain volatile over the coming years, the International Energy Agency (IEA) said Wednesday.
"In 2015, the volume of conventional crude oil resources that received development approval fell to its lowest level since the 1950s and the data available for 2016 show no sign of a rebound," the IEA said in the executive summary of its latest World Energy Outlook.
"We estimate that, if new project approvals remain low for a third year in a row, then it becomes increasingly unlikely that demand... and supply can be matched in the early 2020s without the start of a new boom/bust cycle for the industry," the report states.
The IEA cited the "remarkable resilience" of US tight oil output through the current down cycle, due to the relatively short investment cycle and flexibility of tight oil projects.
However, the same cannot be said for conventional oil projects, which generally have lead times of three to six years from investment decision to first oil, the agency said.
Growth in oil demand over the coming years will be driven by the freight, aviation and petrochemical segments, the report says, with supply increasingly concentrated in the Middle East, despite the strong prospects for US tight oil.