Oil supplies look set to decline over the next five years.

The International Energy Agency (IEA) has forecast that oil supplies around the world will decline over the next five years, despite high oil prices and weak economic growth expected to ease overall demand.

In its Medium-Term Oil Market Report (MTOMR), the IEA analysed market developments up until 2013 and concluded that although spare capacity looks set to rise in excess of 4 mb/d due to a number of new project start-ups and the weak economy, global demand will increase again from 2011 onwards.

Nobuo Tanaka, IEA’s Executive Director, commented on why the cost of oil is so high: “OPEC [Organisation of Petroleum Exporting Countries] production is at record highs and non-OPEC producers are working at full throttle, but stocks show no unusual build. These factors demonstrate that it is mainly fundamentals pushing up the price.”

According to the Agency, global demand for oil products will grow by around 1.6% every year until 2013. “Developing countries will drive demand growth, their total consumption equalling that of mature economies by 2015. Asia, the Middle East and Latin America will account for nearly 90% of demand growth over the five-year forecast period,” added Tanaka.

The IEA has published its MTOMR report in an effort to better understand current trends in order to ensure “adequate oil supply at affordable prices.”

Click here to read about the content of the report.